Why You May Not Need a Living Trust
Living trusts are an excellent way to avoid probate. But do you really need one?
Morning, noon and night, by mail, fax, phone, and email, Nolo is asked whether making a will is enough, or whether it's really much smarter to create a probate-avoiding living trust. Not surprisingly, the answer is, "It depends." Some people need a living trust immediately, others will never need one, and most of us fall somewhere in the middle.
Opting Out of Probate With a Living Trust
Probate is the legal process that inventories and distributes a person's property after death. Many people aim to avoid probate because it is time consuming and expensive. (To learn more about probate, read Why Avoid Probate? and Probate FAQ.)
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There are a growing number of ways to transfer assets to inheritors free of probate within weeks or, at most, months of death. These include making gifts before death, adding a pay-on-death designation to a bank account, holding your house in joint tenancy with right of survivorship with your spouse or partner, and naming a beneficiary for life insurance and retirement accounts. (For more on these methods, see Ways to Avoid Probate.)
But only the living trust can be used for all types of property and offers the broad planning flexibility of a will. With a living trust, for example, you can name alternate beneficiaries to inherit property if your primary beneficiary dies before you do. That's something you can't accomplish with joint tenancy or a pay-on-death bank account.
Drawbacks to Living Trusts
Living trusts do have a downside. Compared to wills, living trusts are considerably more time-consuming to establish, involve more ongoing maintenance, and are more trouble to modify. A lawyer-drafted trust will cost upwards of $1,000, though the cost will shrink dramatically if you use a self-help tool to make your own trust. Also, you'll still need a simple will, as a back-up device, even if you create a trust.
Is a Living Trust Right for You?
These drawbacks are outweighed by the benefits for people who have large estates and for those who are likely to die in the next ten years or so. To decide if you need a living trust, consider these factors:
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