A living trust is a trust that is funded with assets which can be amended and/or revoked by the settlor (creator). A living trust can be used to handle financial affairs while alive and dispose of property after death. As an attorney, many clients have shown an interest in living trusts because of the fact that they are an alternative to probate court.
Many financial planners and insurance agents (and even some attorneys) have cashed in on the phrase “avoiding probate court” by offering a trust to every client that walks through the door to discuss estate planning. There is a lot of confusion about what “avoiding probate court” means and many people believe that it means “avoiding estate taxes.” This is incorrect. Avoiding probate does not mean avoiding taxes, but rather avoiding the process of probate.
The advantages to creating a living trust are that a living trust provides the settlor with greater privacy, lower court costs for the beneficiaries, lower attorney fees for the beneficiaries, lower appraisal fees, lower executor fees (as compared with trustee fees), living trusts often reduce the probability of litigation, and living trusts also offer almost immediate access to the assets after death.
The disadvantages to a living trust are that it is more expensive to create a living trust than a will, living trusts have higher annual expenses than a will, and living trusts require a lifetime of effort to manage and maintain until death. In addition, living trusts do not protect assets from medicaid rules.
