Call Today

The pros and cons of a living trust

While doing your research on effective estate planning, you have probably heard that avoiding probate is beneficial and that the best way to do so is through establishing a living trust. Another name for this kind of financial arrangement is a revocable trust. 

A living trust is one you establish during your lifetime and that you remain in control of. Before you decide to set it up, however, understand all the pros and cons of this kind of trust to ensure you make the best choice for your estate.

Advantages of a living trust

  • You remain in control of the trust for as long as you live.
  • You receive protection in the event of incapacitation.
  • You can modify or cancel the trust as your needs change.
  • Your beneficiaries avoid the time, expense and publicity of going through probate.
  • Your assets become immediately available upon death for use in paying expenses.

Disadvantages of a living trust

  • It does not save you from income and estate taxes.
  • It may be more expensive due to legal and administrative fees.
  • It requires continual updating.
  • Not every asset is eligible for transfer to the trust.
  • Assets are not safe from creditors.
  • Beneficiaries can contest the trust.
  • It can become public if litigation ensues.

Another option

If you want to avoid the cons of a living trust, another option is an asset protection trust. It is also known as an irrevocable trust, simply meaning that you cannot change its terms. However, it offers more protection for your assets by denying creditors access to them and saves you money by eliminating taxes and other fees. It does not require constant management and also allows for avoiding probate.

It is important to note that regardless of the trust you choose, it does not replace other necessary estate plans, such as a will, guardianship or health care power of attorney.

No Comments

Leave a comment
Comment Information