As an estate planning attorney , I often encounter clients who are navigating the complexities of creating a trust for their assets. Two common types of trusts are the living trust and the testamentary trust. In this blog post, I’ll shed light on why a living trust is generally a better choice than a testamentary trust for most individuals and families.
Understanding the Basics
Before we delve into the advantages of a living trust, let’s clarify what each type of trust entails:
- Living Trust (Revocable Trust): A living trust is established during your lifetime, and you retain control over your assets placed within it. You can modify or revoke it as needed. Upon your passing, the trust seamlessly transfers your assets to your chosen beneficiaries without the need for probate.
- Testamentary Trust: A testamentary trust is created through your last will and testament. It only becomes effective after your death, and it typically involves a court-supervised probate process to distribute assets to beneficiaries.
1. Avoiding Probate
One of the most compelling reasons to opt for a living trust is to avoid probate. Probate is a court-supervised process that can be time-consuming, costly, and public. With a living trust, your assets are transferred to beneficiaries outside of probate, saving both time and money.
2. Privacy Matters
A testamentary trust is a matter of public record since it’s part of your will, which becomes a public document after your passing. In contrast, a living trust remains private, ensuring that your financial affairs remain confidential.
3. Faster Asset Distribution
Assets held in a living trust can be distributed to beneficiaries without the delays associated with probate. This allows your loved ones to access their inheritances more quickly and efficiently.
4. Incapacity Planning
A living trust provides a mechanism for managing your assets if you become incapacitated. You can name a successor trustee to take over without the need for court-appointed guardianship or conservatorship.
5. Flexibility and Control
Living trusts offer flexibility. You can modify or revoke them as your circumstances change. In contrast, testamentary trusts are more rigid and may require a formal amendment to your will.
6. Cost-Effective in the Long Run
While setting up a living trust may involve some initial costs, it often proves to be more cost-effective in the long run. The savings from avoiding probate expenses, including attorney’s fees and court costs, can be substantial.
7. Protecting Minor Beneficiaries
If you have minor beneficiaries, a living trust allows you to provide clear instructions for their care and financial support without the need for a court-appointed guardian.
Closing Thoughts
While both living trusts and testamentary trusts have their place in estate planning, the advantages of a living trust often make it the preferred choice for individuals and families seeking to streamline the transfer of assets, maintain privacy, and exercise greater control over their financial affairs.
However, it’s crucial to remember that estate planning is highly individualized. Your specific circumstances and goals should guide your choice of trust. Consulting with an experienced estate planning attorney can help you make an informed decision tailored to your unique needs.