What is a living trust, and should I have one instead of a written will?
Estimations show that only around 20 percent of Americans have living trusts. Is a living trust the right option for you?
A living trust is a written legal document that allows you to place your assets into a trust during your lifetime. Upon your death, those assets will be transferred to designated beneficiaries chosen by your successor trustee, or chosen representatives. The difference between a living trust and a will is that wills contain a distribution plan to be used after your death. In a will, you name an executor to oversee the process, and none of the will’s terms go into effect until your death.
Why would someone choose a living trust over a will?
First and foremost, through a living trust, you can avoid the probate process. This means that your assets will often be distributed to your heirs more quickly than they would with a will. Your successor trustee covers your debts and then distributes your assets, according to your instructions.
Living trusts can also cost less, depending on your financial situation. A living trust often has a higher up-front cost, as it is a more complex document than a will. Additionally, the trust must be funded through your bank accounts, stocks, bonds and certificates. Creating a living trust can also involve things like changing life insurance policies, dealing with retirement accounts and more. However, in the long term, you can save your estate money due to the lack of need for probate.
Living trusts also provide more privacy, as they are not made public, unlike wills.
Which is the better option? As always, deciding between a will and a living trust is best done with the advice of an estate planning attorney.