Estate planning is an effective way to pass along one’s assets with minimal court involvement. One particularly effective estate planning tool is the living trust. Whether you should include a living trust in your estate plan depends on your unique circumstances and needs. However, regardless of whether you ultimately decide to include one in your estate plan, understanding the pros and cons of a living trust can help you make an informed decision. In this article, we examine the pros and cons of living trusts.
What is a Living Trust?
A living trust is a legal document that allows you to dictate how your possessions will be distributed after you die. When you place property into a living trust, the trust becomes the owner of the property, but you can still control it during your lifetime. Most types of assets can be placed into a living trust. Unlike a will, however, assets held in a living trust do not have to go through the probate process before being distributed to beneficiaries, and this can help your loved ones maintain their privacy while saving money and time.
Pros of Living Trusts
Living trusts have many benefits, including:
- Probate avoidance: As noted above, trusts don’t go through probate. Probate can be a time-consuming and expensive process, so avoiding it via a living trust relieves your loved ones of this burden.
- Flexibility: A living trust is a flexible instrument, allowing you to make adjustments when necessary to account for life’s changes.
- Privacy: Unlike a last will and testament, which is a public record, a living trust remains private even after your death.
- Useful in cases of incapacity: Should you become incompetent or disabled, your living trust automatically names a person as your trustee to manage the trust’s assets. With a living trust, a durable power of attorney is not needed.
- Tax benefits: Finally, although the details of this benefit are beyond the scope of this article, living trusts provide multiple tax benefits to trust beneficiaries.
Cons of Living Trusts
Although the pros of living trusts far outweigh the cons, living trusts do have a few negative aspects, including:
- Cost: Although living trusts typically save money in the long run, they can be expensive on the front end. For example, living trusts sometimes have added fees for retitling and updating. In addition, if you name an institution as your trustee, you may have to pay the institution separately.
- Management: A living trust must be constantly updated to address changes in your life. While the ability to do this is ultimately beneficial, actively managing your trust will require you to devote a significant amount of time to ensuring it remains up to date.
Contact a Michigan Estate Planning Attorney
If you are ready to begin the estate planning process in Michigan, you need an experienced Michigan estate planning attorney on your side. At Keating Law, PLC, attorney Thomas Keating will help you draft an effective estate plan. With over 25 years of experience drafting estate plans for clients, Thomas Keating understands what it takes to create a plan that will protect you and your loved ones for years to come. Please contact us today to schedule a free consultation.