Is a living trust the best way to pass on an inheritance to your family?

This article is intended for educational purposes only and is not legal advice. For guidance regarding your personal situation, please contact an attorney.

One of the most difficult financial tasks you may face in your lifetime is deciding what will happen to your assets once you are no longer around. But despite the inherent discomfort of estate planning, it is an important element to address.

Now, in the course of estate planning, you may be looking for different ways to pass on assets to your children, grandchildren, or other people you care about. And you have a few options.

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You could write a will that sets out your final wishes. But you may also want to consider using a living trust to pass on an inheritance to your family.

There are a number of benefits to doing this. But it’s important to look at the big picture.

The top of a living trust

A living trust is an arrangement that allows you to transfer assets. You do this by placing assets in the trust that your designated beneficiaries inherit.

The nice thing about a living trust is that you maintain control of your assets while you are alive. If you change your mind about a particular asset after you’ve placed it in the trust, you can remove it. You can also add or remove beneficiaries as you see fit.

But perhaps an even greater benefit of a living trust is that it will not be subject to probate as a will. When you die and leave a will, your loved ones are forced to go through probate, which is a court’s way of proving the validity of a will.

Probate can be a long process and an expensive one as well. And during probate, your will also becomes a matter of public record. Goodbye privacy!

With a living trust, loved ones could have access to their inheritance sooner and without the same hassle as probate. Just as importantly, their privacy is protected so that no one can simply look up records and find out how much money they have inherited.

Issues to consider with a living trust

If there’s a downside to creating a living trust, it’s the cost. You should expect to spend more for a living trust than for a standard will. And the more complex your estate, the higher your attorney fees could go.

Of course, if your estate is complicated, you may pay even more for a lawyer to help you with a will than someone with a more basic financial situation. But you should see what costs you’re looking at before making a decision.

You should also be aware that placing assets in a living trust will not necessarily benefit you from a tax perspective. The assets you place in the trust are subject to any taxes you would normally have to pay. If you work and earn $150,000 a year, you can’t, for example, put that money into a trust to avoid paying income taxes.

But overall, a living trust can be an estate planning tool that is beneficial to you and your family. So it’s worth discussing the option with them and also with a lawyer who can weigh up the pros and cons for your personal situation.