Why pay more for a living trust?
Quite often, I meet with clients who say all they need is a simple will. Then we talk more about family, goals, and assets.
Sometimes they are correct and all their goals can be accomplished by using a will as the centerpiece of their estate plan. However, more often than not, they decide they would prefer to plan using a living trust, rather than a simple will.
A living trust usually costs more to set up than a will for a number of reasons. Living trusts have a lot more to them, as they are set up to manage assets both during life and after death, whereas wills only come into effect after death. A trustee of a trust is named to manage the trust assets both during incapacity of the trustmaker and after death.
One of the greatest benefits of a living trust is the ability to avoid probate, which is the court procedure necessary to administer estates exceeding $50,000 in Wisconsin.
Probates can be timely, costly, and easily contested. If a trust is properly funded, the court system can be completely avoided at the death of the trustmaker.
A living trust can be set up to provide asset protection for your beneficiaries. This means that their inheritance would be protected for them from things such as a divorce, creditors, bankruptcy, lawsuits, long-term care costs, etc.
Legacy planning can also be done, so upon the death of a beneficiary, anything remaining in their trust can be left to the beneficiaries of your choice, such as your grandchildren. With a will, after a beneficiary receives an inheritance, upon their death, anything remaining goes to the beneficiaries of their estate plan, which is likely your daughter-in-law or son-in-law for a married beneficiary.
Tax planning is another benefit you can find with a living trust. With a taxable estate, a married couple can use a living trust to shelter some of their assets from estate taxes.
If you have a beneficiary with special needs who may already be receiving, or may someday qualify for, federal or state benefits, you want to set up a special needs trust for them to avoid interfering with, and potentially losing, their benefits. This is much more convenient and cost-efficient to set up through a living trust, rather than a will.
Even though a living trust may cost more to establish, by the time administration costs are figured in after death, the total cost of setting up and administering a living trust is usually less than the total cost of setting up and administering a simple will.
The costs of administering a living trust are significantly less than the cost of a probate. Also, trusts are private, which makes it much more difficult to contest. On the other hand, wills are public and probate is a public process, making it much easier to contest.
After discovering all the benefits that can be drafted into a living trust, many choose to pay a little more now during life to get all the benefits of a living trust, and then also save more after death for their beneficiaries.
It's beneficial to discuss your goals and family situation with an experienced estate planning attorney to discuss what type of planning is best to accomplish your goals.
Carissa Giebel is an estate planning attorney and partner at Legacy Law Group, LLC. She can be contacted at carissa@legacylawllc.com, www.legacylawllc.com or (920) 560-4651.