Before you set up a trust, find out if there are any advantages or disadvantages that may affect your decision.
Advantages of a trust?
A living trust sounds a lot like a will. What are the advantages of a living trust over a simple will??
The biggest advantage of the living trust is that any property transferred to the trust during your lifetime will pass directly to your beneficiaries. The trust property will not have to go through a probate court. The advantages of avoiding probate are that:
(1) no probate fees are due on property passing outside of probate;
(2) the property will pass immediately to the beneficiaries; and
(3) the terms of the trust remain private.
Keep in mind that property disposed of by will passes through probate and is therefore subject to probate fees and the delays normally associated with probate. Furthermore, when a will is probated, it becomes a public document that can be obtained and read by anyone.
A trust is also a good way to make gifts to minor children or to provide for the care of elderly parents. It is also used by people getting on in years who are concerned with their own possible future incapacity.
Are there any disadvantages of a trust?
Aside from the need to draft a trust document and then transfer assets to the trust, there are no serious drawbacks to creating a living trust and placing the bulk of your property in the trust.