Do I need a living trust?

The big advantage to making a living trust is a monetary one, since property left through the trust doesn't have to detour through probate court before it reaches the people you want to inherit it. Probate, which may drag on for months, is the court-supervised process of paying your debts and distributing your property to the people who inherit it. By the time the inheritors get anything, a percentage of the property has been used for lawyer and court fees.

With a living trust, the person you appoint to handle the trust after your death – the successor trustee - simply transfers ownership to the beneficiaries you named in the trust. Much of the time, this can be accomplished in a few weeks. When all of the property has been transferred to the beneficiaries, the living trust ceases to exist.

There are other ways to transfer assets to inheritors free of probate within weeks or, at most, months of death, including making gifts before death, adding a pay-on-death designation to a bank account, holding your house in joint tenancy with right of survivorship with your spouse or partner, and naming a beneficiary for life insurance and retirement accounts. Other estate planning devices that avoid probate include joint tenancy, a life insurance policy, and in-trust-for bank account (also known as a Totten Trust), and individual retirement, pension or Keogh accounts.

But only the living trust can be used for all types of property and offers the broad planning flexibility of a will. With a living trust, for example, you can name alternate beneficiaries to inherit property if your primary beneficiary dies before you do. That's something you can't accomplish with joint tenancy or a pay-on-death bank account.

© Alex J. Llorente  2012