On August 27, 2015

Living trusts can be powerful estate planning tools that can offer a lot of benefits to trustmakers (or grantors), as well as their beneficiaries. However, living trusts are not for everyone, as there may be some drawbacks to developing them in some cases.

Below, we’ll explore the pros and cons of living trusts more closely. When you need help determining if a living trust is right for you – or you want experienced assistance devising the best estate planning solutions for you and your family, contact a trusted Denver estate attorney at JR Phillips & Associates, PC.

Pros of Developing Living Trusts

While living trusts can have various benefits, there can be some downsides to them also in some cases, a Denver estate attorney explains.

While living trusts can have various benefits, there can be some downsides to them also in some cases, a Denver estate attorney explains.

Some of the advantages of living trusts can include (but may not be limited to) that they can:

  • Be revised or changed – As long as the grantor is still alive and of sound mind, (s)he can alter the terms of a living trust. This can be very advantageous for those who want to maintain control over the trust, who may want to add beneficiaries (like new children) in the future, etc.
  • Help beneficiaries avoid probate – Any assets transferred into the living trust (i.e., held by the trust) will not have to pass through probate upon the grantor’s death (at which time living trusts become irrevocable trusts).If a grantor has been diligent about transferring all of his solely owned personal assets into the living trust (or has used other estate planning tools), it may be possible for beneficiaries to sidestep probate altogether, helping them save a lot of time, money and stress after their loved one passes away. This can ultimately leave more of the estate assets for beneficiaries, rather than having them go towards probate costs.
  • Bypass public records – Probate proceedings are public record in Colorado. The terms of and assets in living trusts, however, are not. This facet can be hugely beneficial for those who want to maintain some privacy and do not want their family’s assets or dealings to become public information upon a death.

Possible Cons of Living Trusts

Potential downsides of living trusts can include that they:

  • May require regular maintenance/updating – While the possibility of revising living trusts can be advantageous, it can also be burdensome for some people, as a living trust (like  will) will require regular updating as the grantor’s life circumstances evolve or change.
  • Do not necessarily save on taxes – There’s a common misconception that living trusts bestow tax savings when, in fact, they usually do not necessarily offer significant tax savings. While there may be other estate planning options that can save on future tax obligations, a living trust alone will not necessarily do this for grantors and their beneficiaries. This can be a downside for those who have developed living trusts under this misconception.
  • May not help beneficiaries completely bypass probate – Ultimately, if a decedent leaves behind a significant amount of personal (solely owned) property that is not held in a trust, probate will still need to happen. This is not necessarily a downside of living trusts as much as it may be a downside to not having taken the sufficient estate planning steps ahead of time to help beneficiaries minimize their probate obligations and costs.

Contact a Denver Estate Attorney at JR Phillips & Associates, PC

For experienced help devising an estate plan or settling an estate, contact a trusted Denver estate attorney at JR Phillips & Associates, PC.

To discuss your options during an initial consultation, contact us today by calling (303) 741-2400 or by emailing us using the contact form at the top of this page.

Categories: Trust Administration