A living trust is a document that creates a legal entity separate from you. It is a living trust because it comes alive while you are still living and remains alive after your incapacity or death.
The trust’s purpose is to assure proper management of your affairs during and after your lifetime, even if you become incapacitated.
While you are living you have complete control over your assets — they belong to you as trustee of your trust.
With a will, your chosen agent distributes your estate according to your wishes. However, a will alone will not avoid probate, will not reduce estate taxes, will not make funds immediately available and may result in financial hardship for your family.
Your will is public information and may be viewed in the probate court by anyone after your death. Sadly, the probate process is very slow, often nine months to two years or more.
What happens if I die without a will or a trust?
The court will probate all but the smallest estates. This almost certainly includes anyone owning a home.
The probate court judge will appoint an executor to manage and distribute your estate (this person will likely be a complete stranger). Distribution will be made to legal heirs whether you want this or not.
Court, legal, and administrative fees will be taken out of your estate. For example, if you own a home worth $400,000 (regardless of the amount of any mortgage), fees of approximately $24,000 (set by statute) would be taken out of your estate.
If you own a business, activities may be disrupted during probate.
Your family, even while mourning your death, will be burdened with red tape while clearing up your estate.
What happens if I die with a trust?
When you protect your assets and family with a trust, your affairs are kept private and all your wishes are carried out as you instruct. There is generally no probate, so no probate fees, court or judge is involved, and generally there are no surprises if your successor trustee acts in accordance with the instructions you left in the trust.
Probate is a court proceeding that results when a person with assets worth over $100,000 dies without a living trust. The process is often slow, public and expensive. Your heirs will not have access to your assets until the judge says they can be released. A will alone does not avoid probate.
It protects your family from enduring the expense and red tape of probate.
You avoid having a judge determine how your estate will be distributed.
It reduces or eliminates the need for the court to appoint a conservator if you become incapacitated.
It allows your chosen successor to arrange for your long-term care.
It reduces or eliminates the estate tax (for couples) by preserving and utilizing your federal estate tax exemption after your death.
It allows you to maintain control over your assets while you are living and to control the distribution of your estate after your death.
And it gives you peace of mind, knowing that you have a plan in place that benefits you now, and your family and heirs after your death.