Nobody likes to think about dying, and that’s the primary reason so many people go without an estate plan. But when it comes to taking care of your family, you have to prepare for the inevitable. Taking care of your family includes preparing an appropriate estate plan, which should include legal arrangements that anticipate both incapacity and death. A power of attorney for finances, and advance health care directive, can appoint an agent to manage your money and health care in the event you become incapacitated, or unable to make your own decisions about your money and health care. A will and living trust are useful tools for managing your affairs after your death. Although both allow you to dictate how your assets will be distributed when you die, a living trust has a distinct advantage over a will.
A fully funded trust avoids probate, a court-supervised legal procedure for administering a person’s estate after they die. Although there are some benefits to having a court supervise an estate’s administration, people generally prefer to avoid the process for several reasons.
Probate is slow. A typical probate can take a year or longer. An attorney can prepare your trust in a few days or weeks. After your death your successor trustee can distribute assets to your beneficiaries quickly.
Probate is relatively expensive. While preparing a trust might cost a few thousand dollars, even a simple probate could cost more than twenty thousand dollars.
In a probate proceeding, records are available to the public. For many people, this may seem unimportant. But if you want to keep certain people, like friends, cousins, or a former spouse, from learning about your finances—and your beneficiaries—a trust is the way to keep your affairs private.
In sum, using a living trust to plan your estate is the preferred method of distributing your assets after your death. However, any comprehensive estate plan would include a trust and will, particularly if minor children are involved, because only a will can appoint guardians. Moreover, a will is necessary to “pour over” any assets into your trust that may have been overlooked during the trust funding process. In any case, a trust remains the cornerstone of any good estate plan.