Creating a living trust often allows an estate to avoid probate, making them an incredibly popular option in estate planning. This simplifies the process considerably for estate executors and loved ones, but a living trust is not always the best option for every family. There are several factors to consider before putting a trust in place, such as the size of the estate and state laws regarding trusts and probate. Here are some considerations to bear in mind as you research estate planning options.
What are the benefits?
Living trusts are attractive for a number of reasons. First and foremost is their flexibility; you can add or remove assets from the trust at any time without a complicated process. They are also convenient in cases of illness or injury, since all the assets are already in trust should the person who created it lose the ability to make decisions on their own. Another positive attribute is the simplification of probate. Assets held in trust simply transfer to the named trustee. This is especially useful if there is property in multiple states involved, as it avoids the necessity of undergoing probate several times.
Most of the benefits of creating a living trust are more useful to large, complex estates with a lot of property to transfer.
How does it work?
Living trusts are legal documents that transfer all named assets owned by the trust’s maker into a trust. The document must list all the property and name a trustee—often trust makers name themselves or their spouses as trustees. Titled property such as real estate must be retitled when it is placed in trust. In a revocable living trust, the trust maker still has access to all the property and can cancel the document if they so choose. Assets may also be held in trust for a specified amount of time after the trust maker’s death, another convenient feature as opposed to a will. Contact an estate planning lawyer with any questions you may have about the differences between wills and living trusts.
How do trusts affect taxes and probate?
The avoidance of probate is one of the main reasons people cite for creating a revocable living trust. This is a decision that should be made with the size of the estate in mind, however, since most states have provisions allowing for estates worth less than $50,000 to avoid probate altogether. For those that cannot avoid probate, setting up a trust sometimes involves comparable expenses to probate fees. Living trusts can help avoid lengthy probate court proceedings if the estate is complicated, although most probate cases are resolved in a few months or less.
Living trusts do not affect estate taxes, which are completely separate from probate. Only irrevocable trusts can ensure that the property they contain will not be taxed, and unlike revocable living trusts, they cannot be altered after their creation. As of 2017, estate tax returns are only required of estates valued at more than $5,490,000, so they do not affect the majority of property owners.
For additional questions about trusts, contact Queens probate lawyer Richard Cary Spivack.