When you contemplate the best way to pass on your legacy, there can be many questions.  Should you set up a living trust or does a will cover all your bases?  Many of my clients that have estate planning concerns will turn to a trust.  The most common reasons I hear are:

I want to Avoid Probate.

I want to have some say in how my family spends my money.

I want to protect as much from estate tax as I can.

Probate has the potential to be expensive, but the process itself isn’t completely horrible.  Probate does make your estate a public affair, which a trust would be keep private.  A living trust will also help address estate tax concerns where the living will falls short.

When Should You Use a Living Trust?

First off, not everybody needs a trust.  Typically, they are most appropriate for folks that have sizable estates.  Most of my clients that do have trusts will have approximately have an estate of $1 million or more.  When you have an estate of this size and you do go through probate, you can expect that court and legal fees will cost around 2-4% of the total estate.   That’s why setting up a trust will usually pay for itself.

How to Name Your Trustee

Most people will name themselves  as the trustee as the trustee’s role is to manage the trust’s assets.  A husband and wife will usually serve as the primary trustee and then carefully select a successor trustee that they feel will manage the trust the most appropriately.   The successor trustee can be an individual (you better choose wisely) or a financial institution (bank or corporate trustee).  A corporate trustee will be much more expensive, but you take the human element out.

Remember that you can always change your successor trustees at any time.

What Can You Put in a Living Trust

Almost any type of asset can be placed in a trust: savings accounts, stocks, bonds, real estate, life insurance, business interests, and personal property. To fund a trust, one simply changes the name or title on one’s assets to the name of the trust.

Spouses and Domestic Partners

Since a living trust can hold both separate and community property, it may be a convenient estate planning vehicle for spouses and registered domestic partners to plan for the management and ultimate distribution of their assets in one document.

Wills Versus Living Trusts

Wills Living Trusts
  • Subject to probate
  • Become public record
  • Not subject to probate
  • Remain private
Cost Generally cost less to create, but probate costs can be significant. Generally cost more to create, but probate is avoided.

Consult With an Attorney

It’s imperative that you meet with an estate planning attorney that is well versed on the rules and laws of your state.  I can’t stress enough how important is to make sure your living family trust is set up the right way from the beginning.   It will ensure that your legacy is a memorable one for your family rather one that is spent in a court house trying to piece everything together.

There are different trusts for a variety and estate planning situations. Those planning to utilize a trust should consult with an attorney, who should draft a personalized document to conform to the then current laws of the appropriate jurisdiction. There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which estate planning strategies may be appropriate for you, consult your financial, tax, and/or legal advisors prior to taking action.


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