Do You Need a Living Trust?

You’ve undoubtedly heard the ads on the radio or seen newspaper articles recommending a living trust, instead of a will, as your major estate planning document. Is a living trust better than a Last Will and Testament? It depends.

Generally, the answer is no. Most people are under the impression that a living trust, also called revocable or inter vivos, will save your estate inheritance and death taxes. That is false. There is also a belief that a living trust will avoid the necessity of filing for probate. That is generally true, except that if the reason for someone wishing to avoid probate is to save money, that is probably a false savings, since probate fees in Maryland are approximately one-tenth of 1% of the total estate value. That means that the probate fee on an estate valued at $1,000,000 would be $1,000. The preparation of a living trust is likely to cost much more than that.

However, there are certain circumstances where a living trust is preferable to a will. If an individual owns real estate in more than one state, having a living trust makes the transfer of that real estate easier upon the owner’s death (because technically, the individual doesn’t own the property in various states, his trust does).  

A living trust is a private document and, unlike a will, is not required to be filed with the probate court where it would become available for public inspection. Thus, if someone was interested in concealing the amount of his assets or the identity of his beneficiaries, a living trust would be the way to go.