There are many reasons why you might need a living trust. The two most common reasons are that you want to avoid putting your family through the probate process and/or you have minor children and do not want them to inherit all of your money at age 18 if you were to suddenly pass away.
The probate process can be quite expensive and take a long time. The typical cost of a simple uncontested probate is about $2,500 – $3,500 and takes about 9-12 months before closing. Just getting started can take your family many hours of filling out paperwork, notifying all the people who might inherit from you of their possible share and then trying to navigate the court system just to have the ability to make decisions regarding your estate. And look out if your family begins to disagree. Their disagreements will only lengthen the process, hike up the expenses in the form of lawyer’s fees, and can create deep divides among your family regarding who should get what and how much. Unfortunately family members often stop communicating altogether after a probate fight. A properly drafted, executed and funded living trust will ensure that your wishes with respect to your property and money are followed without court involvement.
Another important benefit of a living trust is that if you have minor children and pass away unexpectedly, your living trust can prevent your children from inheriting everything at age 18. The trust will support your children while they are still minors, but you have the ability to delay distributions to them until they are a little older and wiser. Many families prefer the assets to stay in the trust and only allow a portion of the trust assets to become available at certain ages. The most common distribution plan allows for a child to access ¼ of the trust assets at age 25, 30, 35, and 40 respectively.
Many families also like that a properly drafted trust includes a “spendthrift” provision. This language prevents a creditor of your children or beneficiaries from coming after your money to pay for their debts.
These are just a few of the protections a living trust provides to your family. The estate planning attorney’s at the IBC Law Firm can help you wade through all the factors that apply to your family and make sure that the trust is properly drafted and executed.