A living trust is a trust that is created while you are alive. A living trust allows the person making the trust (known as the "trustee") and the person who receives the benefits of the trust (known as the "beneficiary") to avoid probate You can be the trustee of your own living trust, thereby controlling all property in the trust. (A living trust is also known as an "inter vivos" trust). The main advantages of living trusts are:
- Avoiding probate of certain property in the will
- Reducing estate taxes
- Setting up long-term property management
How Can a Living Trust avoid Probate?
You can avoid probate by transferring property into the living trust before your death, and all that you transfer into the living trust will pass outside of probate. The person you appoint to handle the trust after your death, the "successor trustee," transfers ownership to the beneficiaries you named in the trust. This is a fast process, and there are no fees involved. Once property is transferred to the named beneficiaries, the living trust ceases to exist.
Which Is Simpler, Creating a Living Trust or Drafting a Will?
Living trusts are not much more complicated than wills. The question is whether a living trust is right for you. The living trust is extremely flexible. All types of property can be included in a living trust. However, living trusts are often unnecessary. There are differences between a will and a living trust which you should consider:
- Drafting and maintaining living trusts takes more time than writing a will
- Lawyer's fees for living trusts may be higher than for wills
- People with large estates achieve large savings by using living trusts
- Older people who are more likely to die within 10 years may find that a living trust allows them to control the disposition of their property in a direct way
- A will is more appropriate for younger people who are not at the end of their life expectancy
- Wills are a fine way to distribute your property if you don't have a large estate
- If you are married, you can leave the bulk of your estate to your spouse by owning your home in joint tenancy. Bank accounts may also be held in joint tenancy. If you live in a community property state, probate is faster and cheaper, and less necessary to avoid.
Do I Need an Estate Planning Lawyer?
Consultation with an attorney experienced in estate planning is essential to crafting an estate plan that is sensitive to both your needs and those of your loved ones. An estate lawyer will know which type of will or trust is right for you, and do their best to limit your tax liability.