The Advantages and Disadvantages of Creating a Living Trust

If you are interested in the most effective ways to organize and transfer your assets and property to your heirs, you likely noticed that the words “living trust” tend to crop up frequently in conversations and resources surrounding estate planning. Creating a living trust may indeed prove to be a practical addition to your estate plan, entailing certain advantages that are unattainable by simpler estate planning tools.

At the same time, it must be noted that a living trust may not be for everyone. As most legal tools, living trusts come with their pros and cons. This article will help you understand both the advantages and potential disadvantages of creating a living trust so that you can make an informed decision whether or not to include one as a part of your estate plan.

What Is a Living Trust?

Put simply, a living trust is a kind of a “holding bin” for your property and assets. You create a living trust while you are still alive by the means of a trust agreement. The agreement stipulates that you as the grantor give control over certain property and assets to a trustee. In most living trusts, the grantor can also be a trustee. The agreement also specifies the beneficiaries of the trust – that is, the individuals to whom the property will be transferred upon the death of the grantor.

The Pros of a Living Trust

The most important advantages of creating a living trust include:

  • Assets and property in the trust avoid probate. Since probate can be time- and money-consuming, most people would prefer to take some measures to avoid sending their estate through this process. Trusts are a perfect tool to achieve that goal. Property and assets put in trusts can pass directly to trust beneficiaries without the need for lengthy and costly court oversight.
  • A trust can include property in different states. If you have a property in two or more different states upon your death, each of them will have to go through probate separately in accordance with probate laws of a given state. Transferring property from different states into one living trusts can spare your heirs this additional hassle.
  • The trust agreement is private. Unlike the probate proceedings – which may easily become public by virtue of being part of the court record – the details of the trust agreement, along with all your wishes and private information regarding your heirs, will remain strictly confidential.

The Cons of a Living Trust

As mentioned, living trusts don’t come without their disadvantages. Here are the most important issues you need to take into consideration when weighing the decision whether to create a trust or not:

  • May not entail desired tax benefits. Revocable living trusts can be dissolved at any point during the grantor’s life and therefore offer little to no additional tax benefits.
  • May require additional legal documents. In order for the trustee (or a successor trustee in case the trust agreement appoints you as a trustee during your lifetime) to be able to effectively manage your affairs, additional documents – such as durable power of attorney – may need to be created. This entails additional time and costs as well.
  • Requires a lot of administrative work. Creating a trust will not bring about the desired results if you fail to transfer title to all assets to the trusts. This may be a time-consuming process, requiring diligence and effort on your part as well as some additional administrative expenses.

Need Estate Planning Advice? Contact Schlegel Livingston, LLC

If, after carefully weighing all the advantages and disadvantages, you reached the conclusion that a living trust may be a practical addition to your estate – or if you still need some advice regarding this tool – contact Schlegel Livingston, LLC. We will gladly help you with the creation of a living trust tailored to your needs. In addition, our experienced estate planning attorneys will help you review the circumstances related to your estate, advise with regards to the estate planning tools you may need to successfully transfer your assets to your heirs, and assist you with any other issue you may encounter in relation to your estate plan.

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Schlegel Livingston LLC

Schlegel Livingston, LLC is an established real estate and probate/estate planning law firm in Fort Lauderdale, Florida. We pride ourselves on being a very hands-on law office who will help our clients by any means necessary.

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