By now, you may have heard about the “great wealth transfer.” This refers to the fact that Americans will inherit as much as $72 trillion over the next twenty years. Do you have a plan in place for your family? A recent article, “Is a Living Trust Really the Best Way to Pass an Inheritance to Your Family?” from The Motley Fool, explains how this estate planning tool works.

How do assets pass to heirs? One way is through a Last Will and Testament. Because of the portrayal of “the reading of the Will” in movies and books, this is the asset transfer document that is familiar to most people.  However, a Living Trust is usually a better route for protecting your assets and your family. Read on to learn the advantages and disadvantages of utilizing a trust in your planning.

First, what is a trust? The Living Trust is a legal entity which allows the person creating it—the grantor—to control the terms of the trust and the assets that are transferred to it during their lifetime. When the grantor passes, the grantor has chosen a secondary trustee to take over, managing assets in the trust and distributing them according to the terms the grantor left in the trust.

Living Trusts allow the grantor to maintain control of the trust and the assets within the trust. The grantor can change their mind about any aspect of the trust at any time during their lifetime. They can change beneficiaries, remove assets, or even do away with the trust completely.

All assets in a Living Trust stay out of probate court, meaning the assets in the trust are distributed to beneficiaries with no court involvement. While many people are familiar with a Last Will and Testament, what they may not know is that a Will is not valid unless it is processed through the probate court. In Missouri, a Will is not effective to transfer assets unless it is validated by a probate court judge. Since probate is governed by state laws, you may want to check with a local attorney to find out the rules where you live.

Probate is a lengthy, expensive and public process. It can take years to complete, and everything that happens in probate becomes part of the public record. Anyone who wants to, from nosy relatives to scammers, can get information about your assets and family. On the other hand, a trust is valid from the moment it is created and doesn’t require court involvement. Families often use trusts to maintain privacy from estranged family members and prevent feuds.

However, there is some upfront work and costs associated with a Living Trust. Placing assets into a trust, such as real estate or investment accounts, requires retitling those assets in the name of the trust. Additionally, preparing a Living Trust will cost more than a traditional Will. However, the upfront costs aren’t the only consideration. A Living Trust can avoid probate court and save a lot of money for your family in the end.

Additionally, contrary to what you may read online, a Living Trust isn’t an instant tax shelter. There are types of trusts that you can create if your main goal is to take assets out of your estate to avoid federal, state, or inheritance taxes, but those trusts force you to release control over your assets and aren’t for everyone.

Trusts aren’t do-it-yourself projects either. To do this right, you’ll want the help of an experienced estate planning attorney to get assistance putting a plan together that best serves your unique situation. The best thing about a Living Trust might be its flexibility. No family is exactly the same, we all face unique issues. An experience estate planning attorney can help you write the terms of the trust to address your family’s specific needs.

Book a call with us today to get your plan started. Our attorneys are licensed in Missouri and our law firm services all of the St. Louis Metropolitan Area. We are especially convenient for estate planning in Clayton, Brentwood, Des Peres, Frontenac, Glendale, Webster Groves, Kirkwood, Ladue, Maplewood, Olivette, Overland, Richmond Heights, Rock Hill, Shrewsbury, Town and Country, Creve Coeur, Affton, Crestwood, Sappington, Sunset Hills, Maryland Heights, University City, Warson Woods, and St. Louis City.

Reference: The Motley Fool (July 5, 2024) “Is a Living Trust Really the Best Way to Pass an Inheritance to Your Family?”