What is a Living Trust and Do I Need One?
A living trust is an alternative to a Will and is used when probate should be avoided. Some basics about a living trust:
- You need to put all of your assets into the living trust, including your real estate, bank accounts, cars, furniture, etc.
- You are the trustor (person putting property into the trust), trustee (person in charge of the trust) and beneficiary (person benefitting from the trust) during your lifetime, as long as you have capacity
- When you die or become incapacitated, a backup trustee (chosen by you) takes over without first obtaining court approval
- This is the major difference between a living trust and will, as the trustee controls the assets in the living trust without court process whereas the executor must first be appointed by the court.
- There is no asset or creditor protection provided by a living trust
- It can be amended or revoked at any time while you have capacity
Benefits of a living trust:
- Avoids probate in every state where you have property. If you own property in multiple states, your estate would normally have to go through multiple probates (one in each state) to transfer your assets after you die. With a living trust, you avoid that requirement because the trust, in Washington State, owns all the property.
- Private process. Unlike probate, a living trust is not subject to court process, so it is much more private than a probate.
- No court oversight. Oftentimes, a trustee can get things done much quicker because there is no court involvement along the way. However, this can be good or bad, depending on the circumstances. Sometimes you want/need court oversight.
Cons of a living trust:
- More room for errors resulting in more attorneys’ fees. If you forget to put something into the living trust, you will likely have to go through probate to transfer that asset to your loved ones (I’ve had to open probate for a $3,000 bank account!), which just ends up costing more money in attorneys’ fees.
- More maintenance. You need to be organized to make sure everything you have is included in the living trust as you purchase things or open new accounts, etc.
- More expensive than a Will. A living trust is a more complicated document to prepare correctly, so you should have an attorney help you with this as it requires individualized attention. The cost to create a living trust are usually in $1,500-$2,000+ range.
The short answer is: most people don't need a living trust but they are pretty slick tools when it makes sense in your situation. If you would like you learn more about a living trust, you should contact a lawyer to discuss your situation more thoroughly as we do not currently provide living trusts on Orbit Wills.