Living trusts and their advantages over wills

Estate planning offers many options. For some, a simple will is sufficient. However, others may want to consider some of the alternatives to a will, such as a living trust. A will and a living trust accomplish some of the same things, but a trust offers many advantages over a will.

A living trust is an agreement that is created during your lifetime (hence, it is called a living trust) that involves many parties. One of the parties, of course, is you, who are called the settlor of the trust. You as the settlor choose someone else, called the trustee, to manage your property for the benefit of another person or persons, called beneficiaries.

You can name yourself the trustee, if you want to retain complete control of your property. As the trustee, you have the full power to sell, invest and exchange your assets as you see fit. However, if you name someone else as trustee, he or she has a legal duty to manage the property according to the specifications outlined in the trust documents.

What do living trusts offer over wills?

A living trust is similar to a will, as both specify how your property will be distributed to your beneficiaries after you die. However, a trust gives you certain advantages that wills do not.

First of all, trusts allow you to avoid probate. If you have a will, once you die, your will must go through probate, which is a court proceeding where the validity of your will is verified, your estate debts are paid and your property is distributed according to the terms of your will. The probate process can be expensive and long, with your estate paying the court costs associated with it. However, trusts allow you to skip the probate process. Once you die, your assets are immediately distributed according to the trust document, without having to go through probate.

Secondly, the avoidance of probate allows trusts to offer more privacy than a will does. Since probate is a matter of public record, virtually any person can access information about your estate, unless the court orders otherwise. Since a trust avoids probate completely, the terms of your estate plan can be kept confidential.

Trusts also give you more flexibility in how your property is distributed. Unlike a will, you can add trust provisions that specify when your beneficiaries receive your property and how they use your property. For example, you can specify that your beneficiaries do not receive any property until they are married or specify that the money they receive be only used for educational expenses.

Finally, the flexibility of trusts also allows provisions to be added that will minimize or eliminate federal and state estate taxes.

An attorney can help

The right estate plan for you depends on your individual situation. As estate planning is complicated and has many traps for the unwary, it is important to consult an experienced estate planning attorney when considering your end-of-life decisions. An attorney can ensure that your final wishes regarding your property are carried out with a minimum of tax or other adverse ramifications.