Is a Living Trust Really the Best Way to Pass an Inheritance to Your Family?

This article is intended for educational purposes only and is not legal advice. For guidance on your personal situation, please contact a lawyer.

In the course of the next 20 years, Americans are expected to inherit an astounding $72 trillion in assets. And whether your estate is a larger one or a more modest one, you may be eager to pass wealth down to your loved ones in the most efficient way possible.

To that end, you have options. You could write a will that dictates where you want your assets to go. Or, you could work with an attorney to set up a living trust.

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A living trust is a legal agreement you can establish during your lifetime, and also, control during your lifetime. Your trust can hold assets that can then go to your heirs upon your passing.

A living trust could be a good thing to consider in the course of your estate planning , but it's not for everyone. So it's important to consider the pros and cons carefully.

The upside of setting up a living trust

One big benefit of a living trust is that you're not relinquishing control of any assets. If you place assets into that trust but change your mind, you can undo that decision. You can also make changes to your trust's beneficiaries as you see fit.

Perhaps an even bigger benefit of a living trust is that it helps your beneficiaries avoid the probate process upon your passing. Probate is the legal process of proving that a will is legitimate. It can take a long time to complete, leaving your loved ones in limbo with regard to receiving the assets you want them to have.

You should also know that when wills go through probate, they become a matter of public record, the same way your nosy neighbors could technically get a hold of your mortgage documents and see how much you borrowed for your home. If you're someone who values privacy, and you want to protect the privacy of your loved ones upon your passing, then a living trust could help achieve that goal.

So why wouldn't you want a living trust?

The main argument against a living trust is that it's generally more expensive and complicated to put in place than a traditional will. While it's usually a good idea to use an attorney to write a will, you don't have to. There's software that could help you set up a basic will pretty easily.

But good luck putting a living trust in place without help. Even though you may technically be able to do it on your own, you're likely to struggle without the right legal background. You'll need to decide if the higher cost of a trust is worth it.

And if you're thinking that a living trust could serve as a tax shelter of sorts for your family, think again. Any assets you put into a trust are still subject to estate taxes -- whatever those look like at the time the issue comes into play for your loved ones.

Talk things through with a financial advisor

Asking an estate planning attorney if you need a living trust may be like asking an HVAC company if you should get a new air conditioner. You may not need one, but they might tell you yes to get your business.

So before you consult an attorney to discuss a living trust, sit down with a financial advisor and see what they say. Since your advisor generally won't be the one setting up the trust, they may be in a better position to give you an unbiased opinion.

Of course, if you already have an established relationship with an estate planning attorney you trust, then it's a good idea to ask for their input as well. And if you decide to move forward with a living trust, make sure to find an attorney who comes highly recommended so that the process of establishing yours goes as smoothly as possible.

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