Revocable living trusts have been marketed so successfully that many people think they can’t live—or die—without one. The promises of avoiding probate, ensuring privacy, and preparing for incapacity seem too enticing to pass up. Suze Orman, the popular financial guru, goes so far as to say that “everyone” needs a revocable living trust. But what everyone really needs is some good advice. Living trusts can be useful in limited circumstances, but most of us are simply better off without one. A revocable living trust is essentially a substitute for a Will. Rather than having your estate administered through probate, you would retitle your assets in the name of a trust created for this purpose. Because the trust is revocable, you can amend or revoke it as necessary during your lifetime. Upon your death, the trust becomes irrevocable and your trustee simply distributes the assets to your beneficiaries. Time is saved, costs are minimized, and probate is avoided. What’s not to like?

One potential pitfall is that a living trust is created but never fully funded. For example, the house may have been retitled in the name of the trust, but bank accounts, CDs, and retirement assets might have been overlooked. After your death, it would then be necessary to administer an estate and a trust. The process you hoped to simplify would be more complex than ever, and the goal of avoiding probate would be defeated.

Even if the trust is properly funded, the after-death savings in time and money may well be outweighed by the trouble and expense of setting up and maintaining the trust in your lifetime. Expenses include drawing up the trust agreement, as well as a “pour over” will to channel into the trust any assets that were not titled in its name. Real estate deeds, stock certificates, and titles to cars and boats must also be prepared. The up-front expenses are considerable, and the more complicated your assets, the greater these expenses will be. In addition, as you buy and sell assets in the future, these transactions must be conducted through the trust.

A living trust will help you sidestep the probate process, which means quicker distribution of your assets upon your death. But in Maryland at least, probate is relatively efficient and economical, and it includes several important legal safeguards. Court oversight will help to ensure that the process is carried out properly. Creditors will have only a six-month window of opportunity to make a claim against your estate (with a trust, the period is much longer). And established procedures will help to address any challenges to your will or the administration of your estate.

For certain assets, probate can even be avoided without the need for a trust. By titling your house, bank account, or other assets jointly with your spouse or partner, you can ensure an immediate transfer of the property to the surviving owner. Simply naming a beneficiary on a life insurance policy or retirement account achieves the same result—the asset transfers to the beneficiary upon your death and with minimal delay. “Transfer on death” provisions, which also name a beneficiary, can be added to many other kinds of accounts as well.

Another purported advantage of living trusts is that they can prevent the need for a court-appointed guardian in case you become incapacitated. For older people with relatively straightforward financial and real estate holdings, this can be a genuine benefit. The trustee has complete control of the person’s assets and can manage them for as long as necessary. The same goal can be accomplished much less expensively, however, by preparing a durable power of attorney. An essential part of every estate plan, a durable power of attorney enables you to designate someone to manage your financial affairs if you become unable to.

Who then does need a living trust? Anyone who owns real estate in more than one U.S. state is an excellent candidate. Titling each of the properties in the name of the trust will prevent the need for opening an “ancillary” estate in each location. Someone who has special concerns about privacy may also want to consider a living trust. Probate is a public process, and the documents that must be filed become part of the public record. A list of the assets in a living trust must also be filed, but the trust instrument itself can be kept private.

An effective estate plan takes all of your assets and planning goals into account. A revocable living trust can be part of your plan, but choosing this device should not be where the planning begins. An attorney who practices in this area can tell you whether a revocable living trust is right for you. If you have questions about revocable living trusts, please reach out to one of our estate planning attorneys, Carl Eastwick or Elizabeth Fitch.

This article is intended to provide general information about legal topics and should not be construed as legal advice.