Do I Need A Living Trust? [Estate Planning Q&A Video Series]

Many people have heard the term "living trust" and think it is a magical estate planning tool for everyone. For some people, a living trust truly is a smart way to handle their estate, but for others, it is an unnecessary expense.

In the video and the blog below, I discuss when a living trust may or may not be the right option for you.

What Is The Difference Between A Will And A Living Trust?

A Will only becomes active to transfer assets upon your death. A living trust becomes active when you sign the trust agreement while you are still alive. Even with a living trust, however, the transfers you want to take effect upon your death will not happen unless you transfer those assets into the trust before your death.

A living trust is more costly to prepare than a standard Will because it requires significant work to define how the trust will operate during your lifetime and to provide for how trust assets will pass upon your death. In addition, you must transfer assets into the trust, or the purpose of creating it is defeated. 

With a Will, you don't need provisions for how assets are to be handled while you are alive. You don't need to transfer assets when you draw up your Will, so you can avoid that expense.

If you choose a Will to transfer your assets upon your death, some form of probate may be necessary to carry out your wishes. That, of course, comes with a cost. Read this blog to learn more about the typical cost of probate. However, that expense may be less than the cost of creating and funding a living trust.

How Do You Know If A Living Trust Is Right For You?

A living trust may be the best estate planning choice in some situations. The most frequent one is when you are a Texas resident and own real estate or mineral interests in another state. 

The assets in the other state that you have placed in the living trust will pass under the terms of the trust upon your death, without having to probate your Will in that other state as well as in Texas. This can be a substantial cost saving. Other states' probate proceedings are sometimes more complicated and expensive than Texas probate, and it is wise to avoid this.  

Another situation where a living trust is wise is when you have complicated special provisions you want imposed before a beneficiary can receive an inheritance from you. Often, these are terms you may not want placed in the public record, as is required when probating a Will. Examples are:

• A beneficiary being free from drug use
• A beneficiary maintaining a certain grade point average and minimum number of hours to obtain funds from the trust for college education
• A beneficiary has special needs

If you happen to be one of the extremely lucky people whose individual estate exceeds $12.5 million or $25 million for a couple, a living trust may be warranted to achieve federal and Texas estate tax exemptions. 

Many people incorrectly believe an estate of almost any size triggers estate tax and want a trust for that reason. This is simply not true, and it would be a waste of money to set up a living trust based on that.

Meet With A Trusted Attorney To Ensure Your Estate Planning Is Handled Correctly

Living Trusts aren't right for everyone. But in the situations described in the text and video above, a trust could allow you to protect your estate and ensure your wishes are honored after your passing. To learn more about Wills and the estate planning process, read the other articles in my Estate Planning Q&A Video Series below:

• What Is A Will?
• Do I Need A Will?
• How Much Does A Will Cost?
• How Do I Get A Will?

Ready to get started? Contact Adair M. Buckner using the button below to schedule a free initial consultation*.

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*(The free consultation does not cover actual review of documents or giving legal advice on a specific situation.)

** This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal, or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.