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Ask Dave

Should We Do A Living Trust Or A Will?

Estate planning is a crucial part of showing your family you love them. Dave explains the options.

QUESTION: A listener asks if Dave recommends a will or a living trust.

ANSWER: There are some people in the estate-planning community who are saying the living trust is the answer to everything.  The living trust puts all or the majority of your assets into a trust while you’re alive.  When you die, you don’t own anything because the trust owns it.  That’s a way to avoid your local and state probate tax, but it does not avoid federal estate tax. 

The bad news is that a living trust is very expensive to set up and it’s very cumbersome to live in.  It’s a pain to buy or sell any major assets because you have to deal with the living trust.  A financial planning magazine recently said that 70% of living trusts never have the assets transferred into them.  I only recommend living trusts for very wealthy people in rare circumstances who have assets they’re going to keep for the rest of their lives.

A simple will is perfect for 95% of the population.  You may have an AB trust, an insurance trust, or some other trusts involved if you have net worth in excess of $1 million.  But a will is really all you need.