Everyone starts with a Last Will

A Living Trust is another document in your estate plan, which likely includes Medical and Financial Powers of Attorney.

In addition to a Last Will and those documents, should a Living Trust be part of your plan?

Last Will functions

  • Naming guardians for dependents
  • Distributing personal assets that don't already have beneficiaries listed

Why is there still probate?

Probate is the process (not tax) ensuring the instructions in your Last Will are followed.

If you die without a Last Will, your state has a default Last Will for you, which will be used in probate for your estate.

The process can be simple for small estates but the process can be complicated and involve the use of an attorney. That's when probate can become expensive. Typical costs are 3%-10% of the estate's value.

In some states, probate is triggered by as little as $50,000 in assets.


Assets in a Living Trust avoid probate

Assets in a Living Trust can legally avoid probate. For both families with young children or adult children, quick access to assets may be necessary. Hence, avoiding probate which in some states takes 6-18 months can be an important goal.

Testamentary Trusts, created by a Last Will after you pass, do not help assets avoid probate.

Trusts typically stay in force the duration of the beneficiaries' lifetimes. This feature allows many of the objectives listed in the next column to occur.

What Trusts can add

Once assets are ready to be transferred to beneficiaries, it's important for all beneficiaries to be ready to receive what could be a substantial amount in the eyes of the beneficiaries.

Trusts can hold assets until certain benchmarks are reached, typically a responsible age.

Money can be distributed prior to a designated age for reasonable education, health and support needs, as deemed by the Successor Trustees you appoint.

Your executor's job can be made easier. No Contest Clauses typically disinherit anyone legally contesting the estate, which can freeze an estate for years.

Trusts can maintain a residence for children & their guardians. Mortgages, taxes and expenses can be paid from your living trust until children finish school, at which point the property can be sold and distributed.

A trust can help special needs beneficiaries receiving disability income. An inheritance may interfere with their payments so a trust can withhold their share unless a distribution is needed.

Trusts can maintain a residence for a spouse in a blended family until he/she no longer resides in the real estate owned by the trust.

Married couples can double their estate tax exemption. If your estate (including life ins) is under $2M in '08 or $3.5M in '09 there's little worry for estate taxes. Portions of estates over that limit are subject to hefty taxes of nearly 50%.

To work, assets must be in your Trust

Your trust can only control assets in its possession. Your goal is to transfer appropriate assets into your Living Trust while you are living.

You maintain control of assets in your living trust.

Assets typically transferred to a trust:  Property, bank accounts, vehicles and non-titled assets such as furniture, art, jewelry, etc.

Assets not in the trust but naming the trust as a beneficiary:  Life insurance, annuities

Assets kept away from the trust:  Retirement accounts

Our disclaimer

This site, www.livingtrustvswill.com, does not provide legal or tax advice. It provides general information to prepare you with questions to ask an estate plan document preparer.

It is recommended you consult an attorney or tax professional before taking any actions from this site.


Who are we and what to we sell?

This site does not provide estate planning documents. This goodwill site shares estate planning basics for most states to prepare you before meeting an estate planner. This site contains a small directory of resources.

How do I find an estate planner?

The fastest way is a referral from your financial / insurance advisor, accountant or realtor. Otherwise, ask friends or family.

A simple web search using "living trust city" or "estate plan city" should give you several firms.

Should I use an attorney?

Attorneys can provide additional piece of mind that your estate plan is done correctly but they are not required.

Online estate planning sources

If you choose not to use an estate planner or attorney, online document preparers such as Legal Zoom may fulfill your needs at a lower expense.