Regardless of how much wealth you've managed to accrue in your lifetime, one of your primary goals should be to protect that wealth and ensure that it best serves your needs, as well as the needs of your family. That's why it pays to see what a living trust might do for you and your heirs.

A living trust is a legal agreement that places your assets into a specific fund of sorts. Once your living trust is set up, you can arrange to have those assets treated and allocated as you see fit. For example, you can use them for your own benefit during your lifetime, and then transfer them to your beneficiaries upon your death. Living trusts are usually revocable, which means that you retain the ability to alter the terms of your trust during your lifetime. You can even dissolve the trust completely if it ceases to serve your needs.

Estate-planning document


How living trusts work

Because living trusts can be complicated to set up, you'll typically need the help of an estate-planning lawyer to get started. From there, you'll have the option to appoint yourself as the trustee of your trust, which gives you the right to manage its assets as you so please. Your trust can be established to include a wide range of assets, from investments like stocks and bonds to physical assets like property.

From the time you set up your trust until your death, you'll have the power to maintain control over your assets or make changes to your trust to accommodate your needs and those of your family. Once you pass, that responsibility will fall on your successor trustee, who will then be tasked with managing the trust and its assets. You can also have your successor trustee take over if you become incapacitated during your lifetime and are unable to keep managing the trust yourself.

Benefits of living trusts

There are several good reasons to consider a living trust, particularly if you're dealing with a significant amount of wealth. First, having a living trust allows you to avoid probate, which is the legal process of proving a will's validity. When you have a will that dictates how your assets are to be treated, your beneficiaries will often be subjected to a lengthy and costly procedure to ensure that your last wishes are carried out properly. Living trusts, on the other hand, aren't subject to probate, which means your heirs can get their hands on those assets sooner, and with less hassle.

Just as importantly, a living trust might save your estate a fair amount of money upon your passing. Though there are certain costs associated with establishing a living trust, and you'll spend more on a trust than on a will, depending on the level of assets you have, you might more than make up for that added expense by avoiding probate and the costs that come with it.

Finally, you'll get a lot more privacy with a living trust than with a will. Wills are a matter of public record, which means others can access key information about your family, heirs, and assets. A living trust, on the other hand, will allow you to keep otherwise sensitive information in the family (though your attorney will be privy to it, of course).

Is a living trust the best move for you?

To decide whether a living trust is the smart way to go, you'll need to consider the aforementioned benefits and the extent to which they might apply to your family. If you expect to draft a relatively clear-cut, uncomplicated will that's unlikely to be contested, and you're not particularly concerned with privacy, then it may not pay to spend the money to establish a living trust. On the other hand, a living trust might spare your loved ones the potential ordeal that is probate, and that's reason enough to consider one.

If you're still unsure whether a living trust is right for your family, it might pay to sit down with your beneficiaries, as well as a trusted attorney, and hash out the details. This way, you'll be in the best position to determine how to protect your assets and family both during your lifetime and upon your death.