Why is a living trust so important?
A living trust can be a great tool for saving time, money, emotional trauma and headaches for those who assume control over your estate after you die. At the same time, a living trust allows you to remain in complete control over how your assets will be dispersed while you are still living.
The following list will explain the many advantages to a living trust.
- A living trust avoids probate. If your estate is not in a living trust, it will have to go through the probate court after you die (unless you plan to give everything to your surviving spouse when you die). Probate is expensive, time-consuming and open to the public.
- A living trust is private. Probate court will expose the details of your estate and financial relationships to the public. In contrast, a living trust is administered privately by your chosen trustee and his or her attorney.
- A living trust is relatively speedy. Probate court can take one year or more to settle a modest sized estate. A living trust can be administered by a trustee in as little as a few weeks, depending on the size and complexity of the estate.
- A living trust costs less than probate court. Statutory fees for probating a one million dollar estate are $23,000 to the executor and $23,000 to the attorney. These fees continue to go up as the estate value increases or if there is substantial real estate involved. In comparison, fees for administering a living trust after death are typically in the $5,000-$20,000 range, depending on the size of the estate and the complexity of the plan.
- You can act as your own trustee in full control of your assets. You don’t lose any rights or control over your assets as long as you remain trustee. If you appoint another person (or professional) as trustee to manage your estate, they must act according to the trust instrument, usually under fiduciary principles.
- A living trust gives you control the over disposition of your property at your death. You can instruct the trustee to set up successor trusts to administer your estate for your loved ones and charities, on flexible or fixed terms you decide in advance.
- A living trust gives you peace of mind about your surviving spouse’s estate arrangements. You can breathe easier knowing that your surviving spouse has an estate plan already in place and does not need to create an estate plan from scratch.
- A living trust is flexible – it can be changed at any time during your life to reflect your wishes.
- A living trust does not increase your taxes or require additional tax returns or tax preparation fees. The IRS considers you and your living trust to be the same person, so you report all income and expenses for the trust on your normal tax return without any additional paperwork at tax time.
- A living trust does not have any annual administration costs while you are trustee. When you die, your trust becomes irrevocable and there are expenses associated with settling your estate.
- When you are incapacitated, your appointed trustee will manage your property and take care of you according to the instructions in your living trust.
Despite all these advantages, a living trust may not be appropriate for everyone. In particular, estates with a probate estate of $100,000 or less in gross fair market value, or community property that is passing only to a surviving spouse may not see the benefits of a living trust. Our office will help you decided whether a living trust is right for you.