When it comes time to start the estate planning process, you will likely find yourself with a lot of questions and concerns about what steps you should take next. This is understandable, as creating an estate plan is a complex process, and with several estate planning options available to you, it can be hard to know which option is right for you and your family. One of the most common questions people have when they start their estate planning journey is whether they really need to create a living trust. Unfortunately, there is no definitive answer to this question.
While a living trust provides many benefits and is a popular estate planning option, the fact is that not everyone needs a living trust. Depending on the complexity of your estate, you may find that creating a will sufficiently meets your estate planning needs. Yet, how will you know if this is the right path for you? To help you decide what to include in your estate plan, here is a look at answers to the most frequently asked questions we receive about how to tell if you really need a living trust when estate planning.
Can a Will Avoid Probate?
One of the most common reasons people choose a living trust over a will is that doing so can help much of their estate to avoid the probate process. Probate is the legal process that most estates much pass through after an individual dies that helps inventory and distribute their assets amongst their beneficiaries and heirs. While a will can help guide a probate judge as to how you want your assets divided, it will not keep your estate out of probate. Many people try to take steps to ensure that the majority of their assets are able to be transferred to their inheritors outside of probate, as probate is a time-consuming and expensive process.
However, if your estate is relatively simple, you may be able to keep the bulk of your assets out of probate without a living trust by making gifts before your death, adding a pay-on-death designation to bank accounts, and by naming a beneficiary on your life insurance and retirement accounts. Thusly, while a living trust provides broad estate planning options that can help most of your assets avoid probate, those with less complicated estates may be able to keep their assets out of probate using other means if they don't want to establish a living trust.
Are There Drawbacks to a Living Trust?
You may find yourself wondering why anyone would choose to rely solely on a will if a living trust could help your loved ones avoid the stress and expense of probate after your death. While living trusts can be useful for many people, they do have downsides. For instance, compared to creating a will, living trusts are much more difficult to establish. Living trusts also require ongoing maintenance, and they can be expensive to draft. For those with simple estates involving assets that can transfer outside of probate, a living will present a much simpler, cost-effective estate planning option that allows them to ensure they have a say in how their estate is handled once they are gone without having to go through the complicated process of establishing a trust.
Is a Living Trust Really Necessary?
This may lead you to wonder how you will know if a living trust is right for you, or if you can get by with just a will. Considering the following factors can help you to decide whether or not a living trust is really necessary given where you are at in life.
How Old Are You?
The first thing that you should consider when trying to decide if you really need a living trust is your age. The fact is that someone with modest estates who is in good health and is under the age of 50 likely doesn't really need to worry about probate costs. The fact is that someone in their 40s is relatively young, which could mean spending decades managing and updating a living trust that does nothing for you during your lifetime. While it is a good idea to consider estate planning at any age, most adults under the age of 50 would be fine simply creating a will that would help transfer their property in the unlikely scenario that they die without warning. You could then choose to establish a living trust down the road if necessary.
How Large Is Your Estate?
Of course, another big factor to consider when deciding whether or not you should create a living trust is how wealthy you are. While wealth should not be the sole deciding factor when choosing between a will and a living trust, the fact is that the wealthier you are, the more your inheritors stand to gain by avoiding the probate process. Thusly, a young individual with a complex estate and a large portfolio of assets and investments may decide that they need a living trust in order to protect their loved ones.
You may also be better off with a living trust if you own a small business that you don't want to be tied up in probate proceedings after your death. However, a young individual with modest assets, many of which could be transferred outside of probate, may decide that a living will meet their needs for the time being.
Consider Consulting an Estate Planning Attorney
When starting the estate planning process, it can be difficult to know whether a will or a trust is the right option for you. This is why it is critical that you consult an experienced estate planning attorney to help you get started, as they will be able to guide you through your options and help you make an informed decision based on your unique circumstances. Feel free to contact us to learn more about how you will know if you can get by with a living will when estate planning.
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