Some attorneys and some non-attorneys, such as Suze Orman, push living trusts. In my opinion, this is not necessary and is actually counter productive for many people.

This is not to say that living trusts are useless or not worthwhile for some people. Quite the contrary, for the right person or family, a living trust is clearly the best option. The key is knowing when the living trust should be used and what provisions should be included.

The typical reason given for using these trusts is to remove assets from the probate process. If created properly, as the typical living trust is, the property included in the trust is removed from the probate court’s jurisdiction. Removing assets from the probate process means those assets are not subject to the costs and burdens of probate, which is of some benefit.

This benefit is much less in Minnesota than some other states, though, because Minnesota’s probate procedure is not nearly as expensive as some other states. For some estates, the probate might cost $5,000. For other estates, the probate might be $60,000 plus significant taxes.

However, the benefits should be weighed against the costs. When a living trust is created, it does not automatically give you the benefits. Instead, the property must be transferred into the trust. This is often a time-consuming and expensive process. In fact, this is often where much of the attorney fees are generated.

In addition to the need to fund the trust, there are the added administrative burdens of the trust. When an asset is held in trust, the ownership of the property is split between two or more people. As a result, it becomes more cumbersome to deal with the property. For example, a real estate transfer of non-trust property is actually fairly simple; the deed is straight forward and no lawyer is required to complete the transfer. However, when a trust is involved, a different deed is needed and additional documents are required. As a result, there are additional recording fees, and it is advisable, if not necessary, to retain an attorney to do the transfer.

Lastly, a living trust in and of itself does not address estate taxes if those are due on an estate. Additional trusts, sub-trusts, or complicated provisions are required to deal with estate taxes. This is also quite an expensive endeavor and often costs thousands of dollars. This investment is very worthwhile for some people but utterly useless for others.

In short, living trusts have their uses, but, in my opinion, some people overuse them. A living trust is an expensive tool, and the costs it will save must justify the costs.