By: Tim Fitchett
A common misconception about Estate Planning, specifically trusts, are that they are a service only for the ultra-wealthy. However, living trusts can be incredibly useful for everyone, and can serve an important function no matter what financial position you are in. Proper estate planning pays dividends both in actual money, but also in time and stress for your loved ones.
Probate is expensive. There is no way around it. Court costs alone are generally between $500 and $900. Those fees don't even include the attorney's fees required to draft the necessary documents and submit them to the court. After that, the court has to oversee every transaction, sale, and disposition of funds from the estate. Each time the court is involved requires more attorney's fees for more documents to be drafted and submitted to the court. Considering that probate cases can drag on for years, especially if disputes arise, your inheritance can easily go more to an attorney than to your loved ones. For these reasons, everyone should consider a living trust.
A living trust generally avoids probate entirely. By transferring the assets to a living trust ahead of time, the court does not need to get involved to transfer the ownership of your property and oversee its disposition. Instead, you get to choose someone that you trust to deal with your assets exactly as you see fit, while simultaneously saving the money that you would like to see transferred to your loved ones, charities, etc.
In addition to probate avoidance, trusts also have the benefit of extend control. Extended control allows you to determine how your assets are dispersed over a long period of time. When all you have is a will, or without any estate planning whatsoever, the court determines what assets you have, where those assets go, and then closes the estate. This opens up possibilities of your assets to go where you did not intend them to. With a trust, however, future plans can be created to benefit those closest to you. For example; you can make sure that your 1-year old will have money for college or that your teenager will get a gift when they turn 35. You can also add conditions on the disbursements, such as only giving a $10,000 gift if your granddaughter graduates from medical school. This extended control can give you a lasting impact on your family and show them how much you care, long after you've passed away.
The financial benefits of living trusts cannot be understated. If you have $5,000 or more that you expect to give to your heirs, it is in your heirs' financial best interests for you to take a portion of that inheritance and spend it on estate planning. Although this may seem counterintuitive, consider first the harsh realities of probate and handing over your hard earned money to the courts and attorneys. Putting a proper plan in place will ensure that as much money as possible actually makes it to your heirs, instead of paying the courts and attorneys to fight over your estate.
Pay a lawyer a little now and ensure that your estate is disbursed exactly how you see fit, or your loved ones will have to pay a lawyer a lot later. Make the proactive choice now and have definite peace of mind for yourself and your loved ones.