Assets you put in your living trust go straight to your family and other heirs without waiting for probate. If you have substantial assets or probate in your state is a lengthy process, inheriting through a living trust is quicker and simpler for the beneficiaries. Which assets go into the trust depends on your personal priorities and circumstances.
Pros and Cons
If you have savings accounts stuffed with substantial sums, putting them in the trust's name gives your family a cash reserve that's available once you die. Relatives won't have to wait on the probate court. However, using a bank account belonging to a trust is more work than a regular account. You'll have to fill out the bank's paperwork to transfer control to the trust, and make deposits and withdrawals in the trust's name. It's usually easier to keep any accounts you use frequently in your own name.
If probate is your big issue, there are simpler ways to get money to your family. If you set up a joint account with your spouse, for instance, that person can keep drawing on the account after you die. A payable-on-death account transfers ownership after you die to whomever you name as beneficiary -- no probate necessary. This has an advantage over a joint account in that the payable-on-death beneficiary's creditors can't get their hands on the money while you're alive.
Bypassing probate is only one advantage of a trust. Part of creating a family trust is naming a successor trustee to manage it after your death. If you're incapacitated, the trustee can manage the assets, including your accounts, until you recover. Another advantage is if you want the trust to control the assets for a minor or a beneficiary who's dreadful at managing money. You can't get that kind of control with a payable-on-death account.
The probate laws in your state may make a difference. Many states have simplified probate procedures that allow a small or average-size estate to pass through rapidly. That reduces the need to put your assets in a trust. Several states exclude some assets, such as payable-on-death accounts, when figuring the size of the estate. In that case placing your money in a payable-on-death account might work out better for your estate than a trust would.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.