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-avoidance living trust. Much of this concern is obviously fueled by lawyers and others whose ads flog expensive living trusts and emphasize the horrors of probate.
When you cut through the advertising hype, the real answer to the question of whether you need a living trust is, "It depends." Some people, it turns out, need a living trust immediately, and others don't need one at all -- and most of us fall somewhere in the middle.
Opting Out of Probate With a Living Trust
Enter the concept of probate avoidance. 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.
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.
Since it makes sense to avoid probate, does everybody need a living trust? Not so fast. 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. And if you hire a lawyer, you'll probably pay upwards of $1,000 for the document. The cost will shrink dramatically, of course, if you use a self-help tool to make your own trust. (And you'll still need a simple will, as a back-up device, even if you create a trust.)
|
