When you set out to learn about financial and estate planning, one of the things you hear a lot about are trusts – the talking heads on cable television love to talk about trusts.  Trusts can be helpful in many situations, but they are not always necessary. In fact, they can occasionally complicate a simple situation.

For example, when my father passed a few years ago, my stepmother shared with me a very official looking estate planning binder, which included a revocable living trust.  This trust consisted of pages and pages of outdated tax provisions that they simply did not need and, even worse, it did not reflect what my stepmother told me they wanted.  Essentially, they paid a lot of money for something that does very little for them.  But – let’s get back to the talking heads.

There are many different types of trusts that may or may not be appropriate for your situation: special needs trusts, Medicaid planning trusts, life insurance trusts… the list goes on.  When you see a financial guru on television talking about a trust, they are most likely talking about a revocable living trust.  Creating this type of trust essentially creates a separate bucket of assets that you can control while you are alive and pass on easily when you die.

A trust can help you avoid probate

For most people the primary benefit of having a living trust is that the assets in the trust avoid the probate process, meaning that the assets in the trust stay out of court when you die.  Keeping your assets out of probate is convenient, but whether that convenience is worth the price varies from person to person.  Some states have a reputation for long and expensive probate but in other states, New York among them, probate fees and the process are manageable.  The most common situation where I recommend trusts is when a person owns real estate in another state.  This avoids having to go through a separate probate in that state just for that one piece of property.

A trust can provide privacy 

Another benefit of having a living trust is that it keeps your estate plan private.  When celebrity chef Anthony Bourdain died, the details of his finances and estate plan were broadcast to the world.  Thankfully, most of us won’t be in that situation!  Had Mr. Bourdain held assets in a living trust, his personal information would not have made it to the public domain quite as easily.

A living trust usually does not save taxes

In most situations, not all, but most, a living trust does not help you avoid death taxes.  This is a common misconception that is still lingering around long after the tax laws have changed.  It is an important factor to analyze when determining if a living trust is right for you.

Creating and funding a living trust will cost money and time

Generally, drafting a trust will cost more than drafting a will.  Additionally, transferring things into the trust will take time and may cost money.

Living trusts can be useful tools for some people.  It is very important to discuss the benefits and costs with an experienced estate planning or elder law attorney to determine if a living trust is a good option for you.