LIKE A WILL, a revocable living trust is a way of detailing who should inherit your wealth after your death. But unlike a will, assets bequeathed via a living trust don’t go through probate. It’s also harder for disgruntled family members to challenge the terms of a living trust, and there isn’t the potential publicity that accompanies the probate process.
Why are these trusts referred to as revocable? Assets placed in the trust can be removed at any time. Is it really that advantageous to avoid probate? Much will depend on where you live. In some states, probate is a quick and easy process. In others, it’s costly and cumbersome.
Even if probate isn’t a great hassle where you live, you may want to establish a revocable living trust if you own a vacation home or other property in a different state from where you have your principal residence. If the trust holds this out-of-state property, your estate won’t have to go through probate in two separate states. A living trust can also help if you become incapacitated. Depending on the terms of the trust, your spouse or successor trustee should be able to manage the trust’s property without going to court to get the necessary authority.
If you have a living trust, you still need a will. Inevitably, there will be some probate assets that are outside the trust at the time of your death. Your will can specify who should receive those assets. Also keep in mind that a living trust, on its own, doesn’t do anything to reduce estate taxes.
Next: Children’s Trusts