If you make a basic living trust—like WillMaker's living trust—you can save your family a great deal of time and money. The big advantage is that property left through a trust avoids probate. There are other pluses as well.
Unless you make a trust or use some other probate-avoidance method (such as owning real estate in joint tenancy or designating a payable-on-death beneficiary for a bank account), your property will probably have to go through probate before the beneficiaries receive it. Generally, property left through a will must go through probate.
In the probate process, the will (if there is one) is proved valid in court, and debts are paid. Then, the remaining property is distributed to the beneficiaries named in the will, or, if there isn't a will, the closest relatives. The cost of probate varies widely from state to state but, in the most expensive states, attorney, court and other fees can eat up about 5% of your estate (the property you leave at death), leaving that much less to go to the people you want to get it. If the estate is complicated, the fees can be even larger.
For example at 5%, a $500,00 would pay $25,000, just for basic probate court costs.
At least as bad as the expense of probate is the delay it causes. In many states, probate can take a year or two, during which time the beneficiaries generally get nothing unless the judge allows the immediate family a small "family allowance."
If you own real estate in more than one state, it's usually necessary to have a whole separate probate proceeding in each state. That means the surviving relatives must probably find and hire a lawyer in each state and pay for multiple probate proceedings.
From the family's point of view, probate's headaches are rarely justified. If the estate contains common kinds of property -- a house, stocks, bank accounts, a small business, cars -- and no relatives are fighting about it, the property merely needs to be handed over to the new owners. In the vast majority of cases, the probate process entails nothing more than tedious paperwork, and the attorney is nothing more than a very highly paid clerk.
A living trust can be useful if you become incapable, because of physical or mental illness, of taking care of your financial affairs. That's because the person you named to serve as trustee at your death (or, if you made a shared trust, the other grantor) can take over management of the trust assets. The person who takes over has authority to manage all property in the trust and to use it for your benefit.
EXAMPLE: Margaret creates a living trust, appointing herself as trustee. The trust states that if she someday can no longer manage her own affairs, her daughter Elizabeth will replace her as trustee.
If there is no living trust and you haven't made other arrangements for someone to take over your finances if you become incapacitated, a court must appoint someone. Typically, the spouse or adult child of the person seeks this authority and is called a conservator or guardian.
When your will is filed with the probate court after you die, it becomes a matter of public record. A living trust, on the other hand, is a private document in most states. Because the living trust document is never filed with a court or other government entity, what you leave to whom remains private. (There is one exception: Records of real estate transfers are always public.)
Some states require that you register your living trust with the local court. But there are no legal consequences or penalties if you don't.
The only way the terms of a living trust might become public is if -- and this is very unlikely -- someone files a lawsuit to challenge the trust or collect a court judgment you owe.
Special state rules. In a few states, after a grantor dies, the successor trustee must disclose certain facts about the living trust.