What are the Advantages and Disadvantages of a Living Trust?A Living Trust, whether Revocable or Irrevocable can be an important tool in your estate plan. A Living Trust allows you to accomplish some goals that simply can’t be accomplished with only a Will. Since a Living Trust can also be much more complex than a Will, it is important that you speak to an experienced estate planning attorney from Gullotta Law Group. We can comprehensively answer all your questions regarding whether a Living Trust is right for you, then help you prepare the right documents specifically for your needs. The advantages of a Living Trust include:
- You can avoid probate court with a Living Trust. Probate can be very expensive and can take a significant amount of time as the legal process ensures your debts are paid and your assets are properly distributed. Your heirs may have to pay legal fees, executor fees, and other fees before your assets can be distributed after your death. Generally speaking, probate is much more expensive than doing some simple estate planning tasks in advance.
- You can administer property in different states using one document. If you own property in states other than California, your family members could be forced to file for probate in each state. If you have a Living Trust, this will not be necessary.
- You can effectively manage your business and personal affairs while you are still alive.
- You can choose a successor trustee who will manage your assets should you become incapacitated.
- You can maintain a certain level of control over your finances even after you are gone. Using a Living Trust, you can delay distributions until your children reach a specific age, you can ensure your money does not fall into the hands of an ex-spouse, and you can rest assured that a special needs child can still qualify for government benefits. You can even use a Living Trust to ensure your children do not lose their inheritance because of a divorce, problems with creditors, or substance abuse.
- You can pay medical and other bills using a Living Trust.
- You can reduce the possibility of a court challenge by using a Living Trust. A Living Trust is more difficult to challenge in court than a Will because it is harder to prove you were incompetent when you had the Living Trust prepared. You actively manage your Living Trust during your life, so it is not a single event situation like a Will.
- You can provide scholarships with a Living Trust.
- You can prevent a court-appointed conservatorship should you become incapacitated by using a Living Trust. This can be comforting to families during difficult times, giving your loved ones one less thing to worry about.
- You can distribute assets more quickly to your beneficiaries. Unlike probate, when you have a Living Trust your heirs will receive their inheritance relatively quickly.
- A Living Trust provides more privacy than a Will. The process of probate is public, meaning anyone with an interest can see the details of your estate, including who you owed money to and who will receive your assets. Since a Living Trust does not need to be probated, the contents of your estate are private and occur much more quickly.
There are also some potential disadvantages to a Living Trust, including:
- A Living Trust can be more expensive than a Will to draft.
- A Living Trust will require certain updates through the years, when you gain property or sell property, or when there is a birth, death, or divorce in your family. These updates do involve costs, although Wills also need to be updated from time to time.
- A Living Trust is not court-supervised like a Last Will and Testament, which is good for privacy purposes, but under certain circumstances, court supervision could be helpful.
- To ensure your assets are properly protected, the trust must be funded with those assets.
- There is a certain amount of ongoing paperwork necessary with a Living Trust, although separate tax records or tax returns are not required so long as you are both the grantor and the trustee. Income from property held in a Living Trust is reported on your personal income tax return.
- Because real estate titles are held in the name of the trustee, some banks may balk at refinancing a property. You can get around this, by transferring the property out of the trust, refinancing, then transferring it back into the Living Trust.