Are living trusts as necessary as some make them out to be? The fact is that they are not for everyone. However, they can be used to pursue (and realize) some key estate planning objectives.
A properly written and executed living trust has three key benefits. One, assets placed within the trust are exempt from probate. Two, a living trust is a private document—the way assets from it are distributed will never be made public. Lastly, although creating a trust may cost more than creating a will, trusts are often cheaper for heirs to execute than wills.1,2
Not all assets need living trust protection. Some assets routinely transfer to heirs without being probated—Individual Retirement Accounts (IRA’s), workplace retirement plan accounts, payment-on-death bank accounts, and insurance policies among them.2
Inevitably, some assets may be left outside the trust. Many people live for years after the creation of their living trust and acquire further assets. Unless a pour-over will is subsequently written and authorized to direct those assets into the trust at your death, they will be distributed to your heirs the way the courts see fit (and pour-over wills must be probated). A living trust is not considered a will substitute.3
Living trusts lack creditor protection. They are not exempt from “predators and creditors” who might want a piece of your estate.2
All this said, the larger your estate, the more useful a living trust may be. So, as you think about your wealth and your heirs, you should explore whether a living trust is appropriate for you.
1LegalZoom.com, “Top Three Benefits of a Living Trust” (November 2015)
2Bankrate.com, “6 surprising facts about a living revocable trust” (January 15, 2016)
3 TheBalance.com, “Using a Pour-Over Will in Estate Planning” (May 12, 2017)
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.
This material was prepared for Tedstrom Wealth Advisors and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.