3 Benefits of Using a Living Trust 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.

Being able to pass on an inheritance to your loved ones after you have died is an amazing accomplishment that drives many people's hard work. There's just something about continuing your support beyond your own life that makes the effort worthwhile.

One downside, however, is that the process isn't always as straightforward as most people would prefer. There are different routes to take, and they might not all be suitable for everyone's situation.

One of those routes is a living trust , which can be a useful tool in an estate plan. For those considering going this route, here are three benefits that could help convince you to look further into this option.

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1. You may be able to avoid the probate process

Arguably the biggest advantage of a living trust is that it can often allow your estate to avoid probate when implemented correctly. During the probate process, a court typically determines a will's validity and oversees the distribution of the intended inheritance . In some cases, having legal oversight during the distribution process can be helpful because it ensures fairness and transparency. In many cases, though, the cons of the probate process outweigh the benefits.

There are two main reasons people seek to avoid probate. First, it's generally a fairly long process, taking months or even years to complete. During the process, your beneficiaries likely won't have access to the assets left for them, which could cause financial hardship if they are relying on those assets for their livelihood.

The second reason is that it can often be costly, with lawyer fees, court costs, and other associated expenses quickly adding up. Depending on the inheritance left behind, these costs can leave a beneficiary with much less than intended.

The associated fees will depend on your state. For example, in California, probate attorney fees are set by law and based on the estate's value. In Texas, fees can vary based on the estate's complexity and local practice standards. In Florida, there are relatively few restrictions on fees as long as they don't exceed a certain percentage of the estate's value.

Of course, having a living trust set up also costs money. But a living trust is usually exempt from probate because of the legal ownership of assets within the trust. When you pass away, the assets in the trust can generally be distributed to your beneficiaries without court oversight.

2. You're afforded more privacy than a typical will provides

It doesn't take much searching to find instances where the distribution of an inheritance became a chaotic process. It's unfortunate but not uncommon. You could be thankful that a living trust provides privacy you won't receive with a will.

When a will goes through the probate process, it becomes public information accessible by anyone. People can possibly get information about the deceased's assets, their value, and who inherited them.

This typically isn't the case with a living trust. Details about the trust -- such as its assets, terms, and beneficiaries -- usually don't become part of the public record.

This privacy can be especially useful for those who want to avoid potential conflicts within their families and close circles, or for people who don't want to put a spotlight on their families or other beneficiaries.

3. Living trusts provide greater flexibility to change terms

Living trusts are sometimes referred to as revocable trusts because they can be changed or revoked entirely while you're alive. This flexibility is beneficial because it allows you to adjust to major life changes, whether it's marriage, divorce, additional children, or a drastic change in your financial situation. Whatever the case, having the option to adjust your living trust is useful.

Minor changes, like adding a new beneficiary, can typically be made with a simple amendment. More significant changes, like revamping the distribution process, might require a full redo of the trust. Either way, being able to update your living trust can help ensure it accurately reflects your current situation and desires.

To be clear, wills can be changed or revoked as well. However, doing so often takes a more formal process that can be more costly as well.

As you can see, having a living trust can offer some key advantages. If you are considering using a living trust, consult with an estate planning attorney to see if it makes sense for your situation.

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