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Each day, a lawyer receives questions by people who are wondering whether or not they should have a living trust, or if it’s more practical to create a will. As a trust lawyer, the common answer is “It depends.” Some people should choose nothing less than a living trust, and others will not ever need one. For the average American, they will fall in the middle. The following information is a general overview of some situations that may indicate you do not need a living trust.
Probate is a process that involves the inventory and distribution of a person’s assets after they have died. Probate is time consuming, expensive, and often involves many challenges. Because of this, many people try to do whatever they can to avoid probate.
There are many ways that assets can be transferred to inheritors without going through the probate process. This can usually be done within a few weeks or one month following the death. Examples of these methods include making gifts prior to the death, creating a pay-on-death designation to any bank accounts, naming a joint tenancy, with right of survivorship, on a property deed, naming a life insurance beneficiary, naming a retirement account beneficiary, and more.
A living trust can be used for all physical and financial assets and offers the ability to include precise planning while remaining considerably flexible. In a living trust, it is also possible to name alternate beneficiaries should the primary beneficiary die before you. This cannot be done on pay-on-death bank accounts or other asset transfer methods mentioned above.
Downsides to a Living Trust
There are drawbacks to a living trust. Unlike a will that is easy to draft, a living trust takes time to establish. It also requires ongoing maintenance and is not easy to modify (although it can be done). Asking a trust lawyer to draft a trust can cost upwards of $1000. You will also need a simplified will as a backup.
Should You Have a Living Trust
The drawbacks of a trust significantly outweigh the benefits for those who have significant assets or large estates, and also for people who will likely die in the next ten years. To help you decide, consider the following:
People who are under 60 years of age, with middle-income or less, and in decent health often do not need a living trust. A serviceable will, which is easier to draft an maintain, should be enough to transfer your assets to your beneficiaries.
If you’re concerned about probate, changes in the US court system are being made. Even in the last decade, probate-avoidance techniques have gained a wider acceptance in the court. It is possible that the probate process will continue to be made easier.
In general, the more money you have, the more you can save for your beneficiaries by creating a living trust. Furthermore, if you own a small business or significant assets that you don’t want tied up in probate, you may want to create a living trust – even if you are young.
Your Marriage Status
If you are married and you plan on leaving most or all of your assets to your spouse, and vice versa, you likely don’t need to worry about the probate process. Any jointly owned assets typically do not go through probate, and in many states, surviving spouses can use the expedited probate process.
What You Should Do Next
To ensure you do or do not need a living trust, it may be in your best interest to consult a trust lawyer for further advice. If you’re thinking about drafting a will, a trust attorney offers can also assist you and ensure everything is correctly worded, signed, and prepared.
Thank you to our friends and contributors at Yee Law Group for their insight into estate planning and why you might need a living trust.