Over dinner a few weeks ago, some friends asked me about the benefits of a living trust. When I finished my explanation, they stared at me in surprise and asked, “Then why doesn’t everyone have a living trust?” That’s a good question. The only answer I could think of was, “You can lead a horse to water, but you can’t make him drink.”
Actually, an individual’s failure to establish a living trust is an act of utmost selfishness. The most common reasons for not establishing a trust are “I don’t have time” or “I don’t want to spend a couple thousand dollars.”
But if you die without a living trust, you will almost certainly subject your family to hassles and inconveniences, not to mention thousands of dollars of unnecessary expenses. Furthermore, they will be forced to put up with those inconveniences and incur those expenses at a time when they are least able to deal with such traumas because of the grief and sorrow they will be suffering. Who wants to subject his or her family to that?
When someone dies without a living trust, the only way to transfer property to designated heirs (whether the person has a will or not) is through probate. The family must hire an attorney (generally for a fee of 5 percent of the estate), have numerous meetings, fill out countless forms, seek court approval for everything they do, and finally – six to nine months later – distribute the assets to the designated heirs. The entire proceeding is expensive and time-consuming, and all the information about the family’s assets and liabilities become part of the public record.
On the other hand, if an individual has properly established a living trust, none of this expense, hassle or publicity is necessary. Because the trust owns all the assets and because the trust continues on after the individual dies, there is no need for probate. The trust document itself designates a successor trustee (someone to take over management of the assets after the death of the trustor), and with the death certificate and the trust document, that successor trustee can immediately write checks on bank accounts, manage or sell property or transfer property to designated heirs.
Many people assume they are not going to die any time soon. This is another big reason why they do not “get around to” setting up a living trust. But this is selfish as well. Are you going to subject your family to the risk of tremendous inconvenience and expense simply because you do not want to deal with the unsettling notion of discussing your demise?
Other than a little time and money, there is no downside to setting up a living trust. There is simply not a valid reason why a person who is modestly affluent should not establish such a trust. Many people say, “I intend to set up a living trust, but I am waiting until ‘X’ occurs.” X can be anything (selling the house, getting a new job, buying life insurance, etc.). But no matter what your X is, it isn’t a reason to wait. We always have an X in our lives. It is no excuse for procrastinating, and a poor excuse for subjecting your family to the attendant risks of dying without a living trust.