You have probably heard the term “living trust.” Perhaps you have some vague notion of what it means. But could you explain it to the person sitting next to you?
A living trust is an estate planning tool. In essence, it is an alternative to a will. Like a will, its main function is to direct the distribution of your assets after your death.
Unlike a will, a living trust is a tool for transferring assets to your loved ones without going through a court process known as “probate.” There might be secondary benefits in certain situations and depending on how the trust is set up, such as avoiding taxes and protecting assets from creditors. But, by and large the biggest reason to do a living trust rather than a will is to avoid probate, which can be costly and take several months or years.
If you are considering doing some estate planning (and for the love of your family and friends, and your own peace of mind, I hope you are!) you may be mulling over the question of will versus trust. This is one of the first questions I raise with my estate planning clients. The answer will be based on the unique circumstances of each client.
But, as you are mulling, here are some factors to consider:
• Location of your assets: If you have real property in multiple states, a trust is crucial to avoid probate in each state you own property.
• Your comfort with administrative tasks and paperwork: The “living” part of the living trust is that it is set up while you are alive. It must be revisited and reviewed to keep up with your changing life. Every time you acquire another asset, for example, you have to go through the added work of ensuring this asset is added to your trust.
• Your age and phase of life: Trusts are generally a better idea for an older person whose financial holdings won’t change significantly. Also, trusts are great for those wishing to phase out of managing their financial affairs. Appointing a co-trustee to gradually gain control of their estate can be a great option.
• Your budget: Setting up a trust can cost two to three times what it costs to create a will.
A living trust is an excellent planning tool to assist in end of life issues in a seamless fashion. However, as the name implies, it’s its own living, breathing entity which isn’t the answer for everyone.
Robert (Bob) Good and Scott Bucy are attorneys with the law office of Good, Bucy, Elson and Drescher that specialize in estate planning and business law. Contact them at their Ashland office at (541) 482-3763.