Estate planning isn’t anyone’s favorite subject, but it’s necessary if you want to protect your assets and loved ones down the road. To do so, you need the proper legal documents in place. In some cases, that might mean a living trust. Estate planning can be overwhelming. There are many different ways to navigate it and it could be difficult to pinpoint your best options. So, let’s help clarify some things and find out: do you really need a living trust?
What Is a Living Trust?
In short, a living trust is a legal document that helps you plan your estate. It puts your assets into a trust during your lifetime, hence the name. It also includes directions for where you would like your assets to go after you pass away.
Living trusts can be divided into two types: revocable and irrevocable. A revocable trust is one that you can change or cancel at any point without needing permission to do so. In an irrevocable trust, you need the consent of your beneficiary or beneficiaries to make changes.
You can name yourself as the trustee of your living trust, and you can name co-trustees too. Typically, your co-trustee will be your spouse. You will have to name a successor trustee to represent you after you have passed away.
Why Would You Need a Living Trust?
All of this likely sounds relatively similar to a will. However, a living trust has several significant benefits that a will lacks.
Chief among these benefits is the fact that living trusts don’t have to go through probate. Probate can be costly and time-consuming. If your beneficiaries are depending on you for financial support, it’s best to avoid probate. Your assets could linger in the courts for years.
Living trusts will also protect your privacy, which wills and the probate process do not. A will is a public document, meaning anyone can view it. That increases the likelihood that someone will attempt to contest it. Probate is also open to public view, which means anyone interested can see the details of your assets and estate.
The Downside to a Living Trust
Privacy and a lack of probate sound appealing, so why doesn’t everyone do a living trust rather than a will or any other estate planning option? It comes down to cost.
It’s best to have an estate planning attorney create the trust, and their fees can add up quickly. You’ll also have to change your assets, so they’re in the name of the trust rather than yourself, and you’ll need something called a pour-over will anyway. This will ensure any assets not in the trust are added if you pass away.
What Should You Do Now?
Whether you have a trust and it hasn’t been reviewed in a few years, or you have yet to put one together, you should reach out to an estate planning attorney. They can help get you cross this big item off of your to-do list.
If you have any questions about how trusts work, reach out to one of our advisors at JDH Wealth as we can certainly help you get your arms around these complicated instruments.
Written by Matthew Delaney