Advantages of Trusts

Among the chief advantages of trusts, they let you:

  • Put conditions on how and when your assets are distributed after you die;
  • Reduce estate and gift taxes;
  • Distribute assets to heirs efficiently without the cost, delay and publicity of probate court. Probate can cost between 5 percent to 7 percent of your estate;
  • Better protect your assets from creditors and lawsuits;
  • Name a successor trustee, who not only manages your trust after you die, but is empowered to manage the trust assets if you become unable to do so.

Trusts are flexible, varied and complex. Each type has advantages and disadvantages, which you should discuss thoroughly with your estate-planning attorney before setting one up.

When it comes to cost, a basic trust plan may run anywhere from $1,600 to $3,000, or possibly more depending on the complexity of the trust. Such a plan should include the trust setup, a will, a living will and a health-care proxy. You will also pay fees to amend the trust if it's revocable and to administer the trust after you die.

One caveat: Assets you want protected by the trust must be re-titled in the name of the trust. Anything that is not so titled when you die will have to be probated and may not go to the heir you intended but to one the probate court chooses.

For a trust in which you want to put the majority of your assets - known as a revocable living trust - you also have to have a "pour-over will" to cover any of your holdings that might be outside of your trust if you die unexpectedly. A pour-over will essentially directs that any assets outside of the trust at the time of your death be put into it so they can go to the heirs you choose.

If you'd like to learn about different kinds of trusts, read on.