Explore the Pros and Cons of Creating a Trust in an Estate Plan

Wills and trusts are the primary estate planning documents that are used to transfer property after someone passes away. A will must undergo the probate process before any property is given to the designated beneficiaries. A trust, on the other hand, transfers property to the beneficiaries without any court involvement. A trust also allows you to direct the timing and nature of the distributions to beneficiaries. With an understanding of what a trust involves, you can decide if a trust is right for your estate plan in Bakersfield, and weigh the pros and cons of creating a trust in an estate plan.young couple sets up trust in estate plan

When Should I Prepare a Trust?

It is never too early to prepare your trust and the rest of your estate plan. While inevitable, most of us hate to think about passing away and leaving behind our loved ones. It is a morbid and uncomfortable subject. This may explain why a 2017 survey by Caring.com found that only 42% of adults take time to prepare estate planning documents. However, a living trust will give you the peace of mind that comes with knowing your wishes are documented and that your loved ones will be taken care of when you die.

Pros of Creating a Trust in an Estate Plan

Although a simple will may be appropriate for some people, a trust will benefit many individuals and families. As a rule of thumb, if you are a parent with assets and life insurance, or if you own any kind of property, it’s recommended to set up a trust. Here are the pros of creating a living trust for your estate plan.

1. Avoidance of probate

Probate is the reason most people use a living trust. When you have a will, your beneficiaries will not be able to access their inheritance right away since wills are required to go through the probate process. It’s only after the court examines and approves the will that the executor can distribute the assets according to the terms of the will. This process alone can take months.

When you create a living trust, the trust itself owns the assets. Upon your death, any assets held in a revocable trust will bypass the probate process, saving your beneficiaries time, money, and frustration. A successor trustee that you named will take over the trust to administer the assets according to your wishes.

2. Privacy

The probate process is a public proceeding, so your assets and debts become public record upon your death. How your assets are distributed will also be in the public domain, which could put your beneficiaries at risk of being taken advantage of by unscrupulous individuals.

A living trust helps keep everything private after you pass on. Nobody except the successor trustee and the beneficiaries will be able to access information about the assets that your living trust holds. This is an important advantage for people who value confidentiality in their financial affairs.

3. Flexibility

While you will still have to transfer the ownership of your assets, a living trust enables you to retain complete flexibility when dealing with those assets. As long as you have a revocable trust, you will be able to transfer titles to any asset held by your trust back to yourself or change the beneficiaries or the assets they will get. You can also terminate the trust if you need to later down the line. An irrevocable trust, however, is usually permanent, so it should be carefully considered before you finalize it.

4. Avoid Conservatorship

If you ever become incapacitated, living trusts can help your loved ones avoid costly court-supervised conservatorship, which can be restrictive. The successor trustee that you’ve selected will step in to manage your affairs on your behalf. This helps prevent chaos or unnecessary costs, which is a common issue when there is no estate plan in place.

5. Less Likely To Be Challenged

A living trust is more difficult to challenge in court than a will. While the creation of a will is generally a one-time event, the assets within a trust are managed by you throughout your lifetime. With this in mind, it can be difficult for someone to contest that the trust is invalid or that you were incompetent.

Cons of Creating a Trust in an Estate Plan

While it has its share of advantages, a living trust has some drawbacks, too. These include:

1. It’s Expensive to Fund

Compared to a will, it costs more time and money to create and fund a revocable living trust. You have to create new deeds and other documents to transfer the ownership of your assets into the trust. You also need to contact your bank, insurance, and investment companies as well as transfer agents. You will have to change stock ownership, change the name on accounts, and update your beneficiaries. However, the avoidance of probate can save your loved ones a significant amount of money, which can outweigh these initial costs for many individuals.

2. You Still Need a Will

Your trust may be only partially funded if you die without transferring newly acquired assets. To prepare for this situation, you and your Bakersfield estate lawyer should draft what is known as a “pour-over will.” This type of will designates that any leftover assets should be transferred into the trust at the time of your death. The pour-over will does have to undergo the probate process, however. The will also allows you to name a guardian for any minor children you might have at the time of your death. For this reason alone, many people use both a trust and a will in their estate plan.

Contact Us Today

When you’re ready to begin estate planning in California, it’s best to work with a lawyer who will account for your individual situation. At the Law Office of Kyle W. Jones in Bakersfield, we give each case the personal attention it deserves. As your estate lawyer, we will review your assets and provide sound recommendations for protecting them. Contact our office today to schedule a complimentary consultation.


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