It can help circumvent the expensive and time consuming probate process. Also, it can hold a child’s inheritance in it for an extended period of time. So, whether you are incapacitated, have young kids or want to save your loved ones the expense and headaches of probate court, a living trust can help.
Assets held in a trust at one’s death can be retained for years in the trust after death. Parents can control from the grave. I often set up sprinkling trusts inside of family living trusts so that minor children do not receive their entire inheritance at 18. Most of my clients allow their kids to receive distributions for their health, education, maintenance and support until they are 30 years old. At that time, the remainder of the trust estate is distributed to them. In a probate, the beneficiaries receive their inheritance outright if they are 18 years or older. If they are younger, the inheritance goes into a court supervised guardianship until they reach the age of 18.
If assets are not in a living trust at death, they may be subject to probate, a court-supervised process for transferring assets to the beneficiaries listed in one's will. The circumvention of probate court saves the heirs time and money. Also, the trust affairs stay private and out of public record. Heirs and beneficiaries must still to be notified about the living trust, but the trust does not become part of the public record.
Probate can take more time to complete than the distribution of property held in a living trust. In addition, assets tied up in probate may not be as readily accessible to the beneficiaries as those held in a living trust.
Finally, the cost of a probate is usually much greater than the cost of managing and distributing comparable assets held in a living trust. For instance, statutory attorney fees and statutory executor fees can may amount to $46,000 if the trust estate is valued at $1,000,000. In California, you can imagine the economics of a probate proceeding if the probate estate is valued at $1,000,000 but the decedent's house has a $750,000 loan on it. While there may be $250,000 in equity in the estate, after fees and costs associated with probate, the heirs would receive less than $200,000. In this situation, the heirs would experience a 20% plus cost to probate their inheritance.