Why You Probably Don’t Need a Living Trust

There are many attorneys and non-attorney salesmen advertising and promoting the benefits of living trusts over wills. And while a living trust is sometimes an effective estate planning tool, for most people, it is unnecessary. While this article will lay out some of the reasons why living trusts are not typically necessary, the best way to determine whether a will or trust is right for you and your family, is to consult an estate planning attorney who can analyze the particulars of your situation and advise a custom plan.

One of the major benefits that proponents of living trusts claim is the avoidance of probate. The truth is, most people can avoid or significantly reduce their probate assets, without a trust. The reason is that most of your assets are probably not probate assets.

Assets that pass automatically upon your death without any court involvement
o Bank accounts owned jointly or that are Pay on Death (POD)
o Insurance policies with named beneficiaries
o Retirement accounts with named beneficiaries
o Property owned jointly with rights of survivorship (JWROS)
o Real estate

By having beneficiaries on your accounts, you can significantly reduce the amount of assets that will pass through probate and therefore the cost of probate. If you have accounts with named beneficiaries and your home is titled jointly with your spouse, you probably don’t need a trust because your only probate assets are likely a vehicle and household goods.

Most people have heard horror stories about the probate process. Most of the horror stories deal with situations where there wasn’t an effective estate plan in place or where there was no estate plan at all. In these situations, the statement that probate is a nightmare can be true. However, if you properly plan, probate is a simple, step-by-step process, that does not have to be a nightmare. See the NC Estate Procedure Manual available on our Resource Page.

Another common misconception is that living trusts protect you from estate taxes. The truth is that neither living trusts nor wills protect you from estate taxes. However, most people don’t have taxable estates and therefore do not need to protect assets from estate taxes. NC repealed the state’s estate tax in July 2013 and the 2019 Federal Estate Tax Exemption is $11.4 million for an individual and $22.8 million for a married couple . For most Americans, that exemption will more than cover your estate. If you think your estate is worth more than that, there are tools that estate planning attorneys can help you utilize to reduce your taxable estate before you pass.

The point of this article is not to say that there is never a situation where a living trust is necessary. In some situations, a trust is a useful estate planning tool. A trust is extremely helpful when a person owns property in multiple states. Without a trust holding title to those properties, an estate would likely have to be opened in each state where the property is located, in order to transfer the property. Another situation where a trust can be useful, is situations where there is a child with special needs. A child with special needs can usually not handle receiving property outright, and a trust can help manage these assets and make sure they are properly used for the benefit of the child.

Not every person or family is the same, and therefore, it is important that whatever estate plan you choose, it is carefully crafted for your needs. The attorneys at Rudisill Estate & Elder Law Associates are experienced in not only the legal process of wills and estate planning, but also the probate process. Contact our office if you would like to schedule a consultation to find out how we can help you create an affordable, effective estate plan or navigate the North Carolina probate process.

[1] https://www.irs.gov/pub/irs-drop/rp-18-57.pdf

The information provided in this article is provided for general informational purposes only.  No information contained in this article should be construed as legal advice from Rudisill Estate & Elder Law Associates, or the individual author, nor is it intended to be a substitute for legal counsel on this subject matter.

Rudisill Estate & Elder Law Associates
428 East 4th Street, Suite 200
Charlotte, NC