Some companies use fear-mongering tactics to sell living trusts to people who don’t need them.
So how do you know if you’re really a candidate for a living trust?
The primary advantage of a living trust – which is a legal entity that holds legal title to certain of your assets – is that assets in the trust do not go through probate, the lengthy and often -expensive court-supervised process of distributing your property to your heirs upon your death.
But you may not need the probate benefits, because there are a number of other ways to avoid probate, such as making gifts before death and adding a payable-on-death designation to an account. Plus, living trusts can be time-consuming and costly to set up and involve ongoing maintenance.
So, what should you think about when considering if you need a living trust? Age, wealth and marital status are three things to consider.
Living trusts often don’t make sense for middle-aged people in good health, because people at this stage in life don’t need to worry about probate for many years. The less wealthy you are, the less sense a living trust makes, because if you don’t have significant assets you won’t save much by avoiding probate. Finally, if you’re married, and you and your spouse plan to leave your property to one another, probate won’t be necessary for those assets.
A living trust may be helpful if you have children or grandchildren with special needs, if you own your own business or if you own real estate in more than one state (regardless of your age).
But if you want to know if a living trust is for you, it’s best to consult a financial advisor or estate-planning attorney.
Don’t trust any one-size-fits-all estate-planning product.
The legal and tax information contained in this article is merely a summary of our understanding and interpretation of some current provisions of tax law and is not exhaustive. Consult your legal or tax counsel for advice and information concerning your particular circumstances. Neither we nor our representatives may give legal or tax advice.