Many people turn to estate planning to reduce costs associated with probate, the process wherein the court distributes a decedent’s assets to their heirs. Living trusts are among the most useful for this purpose among the different estate planning tools.
What are the costs of probate?
Probate entails various costs that either your estate or heirs might have to shoulder. These include:
- Executor’s fees
- Lawyer’s fees
- Accountant’s fees
- Filing fees
Probate can take some time to complete and take longer depending on certain factors, such as heirs filing lawsuits to contest terms on the decedent’s will. Unfortunately, prolonging probate often increases some of its expenses, such as lawyer’s fees.
How do living trusts reduce probate costs?
A living trust is a legal document that allows you, the grantor, to transfer some of your properties to another person, called a trustee, during your lifetime. The trustee takes on the fiduciary duty to manage the assets outlined in the trust for your heirs’ benefit. You can assign different types of assets to a living trust, such as:
- Real estate
- Jewelry, antiques and other personal property
- Business interests
- Financial accounts
Because the trust owns these assets, they usually bypass probate upon your death. The trustee can then administer these assets to your beneficiaries sooner and without incurring additional probate costs.
Living trusts are effective, but they are also complex tools. Creating one with the guidance of an estate planning attorney can help you avoid costly mistakes and ensure that it is watertight and enforceable.