If you've done any research into estate planning, then you have probably heard a lot about using a trust, sometimes known as a revocable or living trust, as an alternative to a traditional will. When you hear about all the goals that using a trust is supposed to accomplish, you might think you would be crazy not to use one. Certainly the ability to avoid court involvement after your death is a popular feature, as is being able to set wise goals for the use of your hard-earned property well into the future. The fact is, a trust is a very powerful and flexible tool for estate planning and other purposes, as long as it is prepared and maintained correctly. Whether or not a trust is the right tool for you to use, it is important to understand the advantages and disadvantages before making the special commitment to set up and maintain your trust.
People die. When they do, they usually leave some property behind. Figuring out what to do with the property of a dead person is what the probate courts are for. A trust, on the other hand, does not die, even when the person who created it does. Instead, another person takes over handling the trust, and it keeps going. The trust is a separate legal entity, sort of like a corporation. The trust document contains instructions for how to run the trust, and it also says who serves as trustee, which is the person in charge of the trust property. The trust property is your property; you take everything you own and transfer ownership of it to the trust. Because you get to make the instructions and choose the future trustees, you can plan for the orderly disposition of your property after your death, usually without the need for a court to get involved. This can save thousands of dollars in legal fees and court costs, and it keeps the disposition of your estate a private family affair. One thing to keep in mind is that a trust may cost more than a will when you have it done, but if you do your part to maintain it then your family will end up saving much more money than you spend.
A major pitfall to avoid is failing to do your homework with the trust. Some people forget to transfer all of their property into a trust when they set it up, or they acquire new property in their own name without transferring it to the trust, and this often means that court involvement ends up being required in spite of all the planning. This is why it is very important to be thorough in identifying all of your assets, and to always obtain new property in the name of your trust, rather than in your own name. In any event, all of this is best done with the help of an attorney.