When most people hear the word “trust” in the context of estate planning, they think of a “Trust Funder,” a “Trustafarian” with neohippie values and old-money nicknames like Buffy or Tripp. But in reality, pretty much everyone needs a trust.
Creating a Living Trust isn’t about how much money you have; it’s about who you love. If something happens to you, the trust provides your survivors clarity and protection during a time when they’re grieving the loss of a loved one.
On a high-level, here are the main reasons to have a Living Trust:
You avoid probate.
Probate Court is expensive and time-consuming. If you only have a will, your estate will automatically be routed through probate courts. In California, it takes a minimum of two years for an estate to be settled in probate. That’s two years your survivors have to wait to finalize the transition of assets and move forward.
You save money.
Probate Court also costs money. Your survivors must pay attorney fees and executor fees which can range from $50,000 to more than $250,000 depending on the size of your estate. This expense adds insult to injury when your family is grieving.
It’s private.
A Living Trust is administered in private whereas a will is public record. The process of public probate court can leave your heirs vulnerable to grifters and creditors who wish to exploit their newfound wealth and seize their assets.
For example, James Gandolfini’s Last Will and Testament was completely public when his minor children and heirs received his estate upon his untimely death. Yikes!
You retain control.
When you create a Living Trust, you determine who receives your assets, who administers your estate (a named successor trustee), who becomes the guardian for your children, at what age your children receive their inheritance, and other provisions you can dictate such as what should happen if you’re mentally incapacitated. A will doesn’t provide as much guidance and typically the probate court follows state laws which might not be what’s best for your family. (e.g. In California, the minor children get their inheritance at 18; most parents would like to delay this until the child is 25 or 30).
At a minimum, you need a Will, Durable Power of Attorney and Advanced Healthcare Directive.
(I’m not a fan of fill-in-the-blank forms or online lawyers to handle things as important as guardianship and asset distribution…but if this is the best you can do for now, it’s a fair start).
You can complete these items right away, put them in a safe place, and let a couple people know where to find them.
Once you’ve given this some thought and discussed it with your partner, consider seeking out an affordable estate attorney to draft a Living Trust that will give you peace of mind knowing your family is protected and cared for if something happens to you.
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Sarah Behr isn’t an attorney.
She’s an SF-based Financial Planner (and mom) with her own practice – Simplify Financial – which she started a few years ago after several years directing investments and personal finances for private clients at UBS and Credit Suisse.
Sarah upholds a Fiduciary Standard and Code of Ethics, which means that your interests are placed ahead of her own. She doesn’t sell financial products for commission nor does she benefit from your investment portfolio in any way. She’s a Registered Investment Advisor and a member of the Financial Planners Association.
