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 this video, 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 at the time a trust agreement is signed, while you are still alive. Even with a living trust, however, the transfers that you wish to become effective upon your death will not happen unless you transfer those assets into the trust prior to your death.

A living trust is more costly to prepare than a standard Will because of the significant amount of work that goes into defining how the trust will operate during your lifetime as well as making provision for how trust assets are to pass on your death. In addition, transfers of assets into the trust need to be prepared or the purpose of creating the trust is defeated. With a Will, no provisions are needed for how assets are to be handled while you are alive. No transfers of assets are required at the time you draw up your Will, so that expense is saved.

If you opt for a Will to transfer your assets on your death, some type of probate may be necessary to accomplish your wishes. There is an expense for that, of course. Read this blog to learn more about the typical cost of probate. However, that expense may be less than what the cost of creation and funding of a living trust is.

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

There are some situations in which a living trust may be the best estate planning choice for you. 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, which you have placed in the living trust, will pass by the terms of the trust on 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 in which having a living trust is wise is where you have complicated special provisions that you want imposed before a beneficiary can receive an inheritance from you. Often, these are terms that you may not wish to have placed in the public record, as is required by 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 have a living trust drawn up 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.