You really ought to spend a few bucks and talk with an estate planning attorney where you live. I work as a volunteer attorney in a law school sponsored legal clinic and we see the train wrecks of living trusts in the Elder Law Clinic. Some attorneys sell these like tacos off a taco truck, and folks think they are saving a lot money by avoiding probate. For the average Jill or Joe, that is not the case.
To begin with, there are all kinds of trusts - living trusts, testamentary trusts, poor-over trusts, support and maintenance trusts, spendthrift trusts, etc. and one size does not fit all. And it largely depends on where you live (community property state, separate property state or a hybrid state) your martial status (including a former spouse who for example may have pension rights), children/stepchildren, where you die, what property you acquired (where and with what funds) and the the estimated value of your assets for both state inheritance tax purposes and federal estate tax purposes. So what might work in one situation may not work in yours.
Living trusts are quite fashionable these days. Attorneys sell them so you can avoid “costly” probate and save all of that money and time. Problem is, for a lot of folks they are unnecessary and maybe even dangerous since they require maintenance and they do a very poor job of estate tax planning in some cases. And I won’t even comment on the do it yourself kits.
As a general rule, if you use a living trust (and maintain it) then you can avoid a probate. But that may not be as significant of a benefit as you might think. For example assume you have two major assets: you own a house with you spouse as joint tenants with right of survivorship (and you live in a non community property state) and you have a 401k and have named your spouse as your first beneficiary. If you were to die, the house is her’s/his’as is the 401k. No probate required. Same for banking account if jointly owned, pension benefits (if you are lucky enough to have one and elected a survivor benefit), life insurance etc. In fact, most folks have most of their assets set up in a fashion that already avoids probate. Further, some assets can’t be transferred into a trust. These include pensions, 401k/403b’s etc. You can use a pour-over trust for life insurance benefits but those generally require professional management by a trustee and not your brother in law.
And since we are talking a aviation here, try to get the FAA to register your airplane as the “BillyBob Family Trust” so the trust can be considered the legal owner of the aircraft. I think you may have more than a few questions about that.
However, living trusts may address a simultaneous death that takes you and your spouse if both of you have transferred your assets into the trust, to the extent you can. In my example above, only the house would be affected by a simultaneous death. The other assets would transfer by beneficiary designation with the bank account being the primary exception. Some people think a living trust can help them exercise “dead hand control” from the grave. Generally, the out of the box ones that many attorneys sell can’t but if you have one set up that will provided you find a trustee that is qualified to be a trustee under state law. Finally, like everything else, trusts can be attacked legally. For example, if there was a child born outside of the marriage and not provided for in the trust, she/he would be able to challenge the trust and likely get a share. With a will, you can specially disinherit a child and that normally withstands a legal challenge.
In summary, you need to begin by making a list of your assets, your spouse’s assets,how they are owned and whether they can be passed by a beneficiary designation and how you want your assets to be divided on your death. Take that list to a competent estate planning attorney and get his or her advice. You might be surprised to find out you may not have enough assets that will pass by probate to be concerned. If you live in a community property state, it’s even easier.
Life is complicated these days with multiple marriages, stepchildren, natural born children of the marriage and outside of the marriage, and all kinds other situations. You need to spend the money to get it right - there is no “do-over”.
