For Estate Planning, Consider Using The Living Trust

As my wife and I begin to find ourselves firmly entrenched in the “middle-aged” demographic, it’s becoming more and more important for us to plan ahead. When we were younger, our later-in-life planning consisted mostly of which warm weather destination we wanted to retire to. Now, there’s so much more than that to consider. And with two young girls at home we need to make sure that they’re taken care of both physically and financially should anything ever happen to us.

Estate planning

When most people plan for the inevitable the first thing they think is “I need a will.” While a will is certainly a good first step, we felt that it had some shortcomings and did not address some of the important issues we wanted to concentrate on such as managing financial decisions for our children and establishing our medical preferences. That’s why we opted for a tool that we felt was more complete – the living trust.

That isn’t necessarily to say that a living trust is a better choice than a will in all scenarios. There are a number of cases where a will can indeed be the way you want to go. If you’re looking to name legal guardians for your children or designate beneficiaries of your estate, you may be able to get by with a simple will. Plus, creating a will would be much less expensive than setting up a living trust. Creating a will on your own using a software package can cost you as little as $50 whereas a living trust could easily set you back $1000 or more to have established. Having a lawyer draw a will up for you would be more expensive but would also help ensure its completeness and enforceability.

But we needed more than just a will would address for us. At a high level, we wanted to make sure that if something were to happen to us, our children would have quick access to our assets to cover their needs. The living trust would accomplish that. Trusts avoid the probate process whereas a will could be tied up in court for months if not years while all of the logistics are straightened out.

The main benefit with the living trust for us was the ability to set up successor trustees. With this feature, we have someone established who can take over for us in all matters in the event of our incapacitation. That means we have someone who can manage our financial affairs in our absence, is aware of our medical wishes if it comes to it and can handle the care of our children if we’re not around. The care of our children is our primary concern. A will would make sure that our assets got to them but the trust also helps ensure that the wishes for our children are also carried out.

Again, this is not to say that a living trust is always better than a will. As our situation grew a little more complex, the living trust made more sense as an all-inclusive option. I think the will gets a lot more publicity as the primary planning option but if you have financial, medical or lifestyle issues (or all three) you want addressed, you may find the living trust to be a better option for you too.

Photo credit: Abme89107

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Author Info

This post was written by David Dierking. David lives outside Milwaukee, Wisconsin and has been working in the financial services industry for over 13 years with a background in investments, accounting, and marketing. He earned his Chartered Financial Analyst designation from the CFA Institute in 2004 and was recently published in the Milwaukee Business Journal. You can also check him out at The Ultimate Fit Challenge

2 Responses to “For Estate Planning, Consider Using The Living Trust”

  1. ParatrooperJJ |  Jun 23, 2010 at 10:55 am

    Using both is best. The will should be a “pour over” will. This directs that any assets that are outside the trust to be put into the trust.

  2. Marc |  Jun 24, 2010 at 1:08 pm

    There are some other things that make a living trust a better option in most cases. A will is a matter of public record, where a living trust is private — no one will know about your private affairs unless you want them to. Also, with a trust, you can maintain a measure of control over your assets after you pass away. Many people like that idea.

    A trust, however, is just part of what you need. It is one of what I call the four pillars of protection. For much fuller protection, you should consider having powers of attorney for health-care and assets, for both you and your spouse. These are incredible valuable documents that are inexpensive, and for which there is no substitute.

    With the trust, the powers of attorney, and the pour-over will that ParatrooperJJ mentioned, you should be in pretty good shape.

    However, don’t forget to fund your trust properly. Fail to do that, and your shiny new trust will be nothing more than expensive paper