A living trust is one of the good ways to leave property to your loved ones and save them from the hassle of the probate process. Probate is the process of a special court that distributes a deceased person’s property to their heirs. It can be a time-consuming and expensive process. There are several ways on how to avoid probate such as holding joint tenancy with your partner, pay-on-death (POD) bank accounts, life insurance policies, giving away assets before death and naming the beneficiaries on retirement accounts. But these are all limited to certain types of properties. A living trust does not have such limitations. Living trusts will allow you to give all of the property in your estate to a trust, and would also enable you to avoid probate.
But living trusts is not for everyone. Setting one up depends on the age, marital status and size of a person’s estate. With all the benefits of creating a living trust, there are some disadvantages.
Living trusts take a long time to establish and requires maintenance. It is not easy to change, unlike a last will and testament. A lawyer could help you set up the trust, but may cost you more than $1,000. Even if there is a living trust, you still need to make a will as a back-up.
Depending on your situation, the living trust may be advisable or not. Look at the following factors that you need to consider in deciding if setting up a living trust is right for you:
The living trust needs constant maintenance and requires energy and money, that’s why it is not recommended for people who are under 55 years old and relatively healthy. A young healthy person probably does not have to worry about the costs of probate for years to come. Until then, creating a basic and simple will suffice. Since the techniques for avoiding probate is becoming all too common and accepted, then there might be more in the future that may no longer require you to set up a living trust.
Size of your estate
Those with larger estates will benefit more by setting up a living trust. The more you have, the more you stand to lose in probate. If you have a business, for example, you don’t want your business to go through probate. Even if you are young and healthy, a living trust may be the way to go in order to save your executor from having to report to the judge on your business for a significant length of time.
If married couples plan to leave properties to each other, then there is no need for a living trust especially if you jointly own the properties. Probate is not necessary for those types of assets. For those properties that are not owned jointly by the couple, the probate procedures are usually speedier for surviving spouses.