This article is intended for educational purposes only and is not legal advice. For guidance on your personal situation, please contact a lawyer.
Estate planning isn’t typically atop everyone’s to-do list, at least in terms of favorite activities. It can be complicated and fraught with legalities and emotional issues that can make even the most straightforward processes murky.
That said, in terms of being responsible for your own legacy, it’s something that should be done sooner rather than later, and a good instrument to consider for distributing your material assets is a living trust.
At its simplest, a trust is way for one person to own and manage another person’s stuff. Or their own. Here’s how the IRS defines it: “In general, a trust is a relationship in which one person holds title to property, subject to an obligation to keep or use the property for the benefit of another.
A living trust involves transferring your assets into the trust, often appointing yourself as trustee. That allows you to manage the assets while you’re still living while leaving explicit instructions for their disposal once you pass away.
Of course, you can go with a last will and testament, but there are three distinct advantages to a living trust that you might want to consider.
Avoid the time and costs of probate
The probate process — in which a court supervises the distribution of assets, can be expensive and time-consuming. Depending on your circumstances and that of your heirs, that can be problematic. For instance, they will need cash to cover your final expenses.
Living trusts — they’re also called revocable trusts — can help you avoid the need to go through the probate process. That can mean faster access to your assets for your beneficiaries, hopefully lessening their stress during their trying times.
Keep it between yourselves
Wills are typically public once they’re filed with a probate court. Unless you want to run the risk of anyone and everyone knowing what you had and who gets it now, a living trust might be the best route for you. They’re private.
Somewhat more flexibility to change along the way
Life happens, right? Living trusts can be easier and less costly to change than a will. You can do things like add and change beneficiaries and assets within the trust.
You can also appoint a successor trustee (and change that along the way, too). A successor trustee will prove invaluable for the time when either your death or a mental or physical disability renders you unable or unwilling to manage your assets. The successor trustee can then ensure that your wishes are carried out.
Unless you’re an expert, consult one
As the IRS points out in its trust definition, a trust is formed under state laws, and “you may wish to consult the law of the state in which the organization is organized. Note that for a trust to qualify under section 501(c)(3) of the Code, its organizing document must contain certain language.”
Like wills, there are do-it-yourself trusts out there. But unless you’re intimately familiar with that “certain language” and a member of a state bar or a certified financial planner or both, it’s highly advisable you consult an experienced estate attorney who can guide you through the process, answering questions you already have and some you didn’t know you needed to ask.
That way, your specific wishes can be met as you provide those you leave behind with a smoother inheritance process that protects your legacy and their privacy.