Financial Literacy

If you have listened to any financial planning expert, he or she has probably warned you about the difficulties of probate. They may have even recommended that you hire them to help you create a Living Trust. A Living Trust is a trust where you are both grantor and trustee. You place all your assets into this trust and spell out how to distribute the principal when you die (as you would in a will). Property held in a living trust does not pass through probate court before it reaches the people you want to inherit it. A side benefit of the living trust is that the trustee you pick as an alternate will have an easier time accessing assets (if you become incapacitated) than will an agent acting under a Power of Attorney.

Although there are cases where the probate process can get very complicated, in most cases, it is not that big of a deal. Creating a living trust can be expensive (you have to transfer ownership of all your assets to the trust), and it doesn't always avoid probate completely since there may be assets that you will own outright. Since you control the assets in the trust by being the trustee, the assets are included in your estate for tax purposes, so Living Trusts do not save estate taxes. Many people, therefore, do not really need living trusts. Discuss this with your attorney when you are reviewing your estate plan.