There are some financial planners, and even a few lawyers, who pitch living trusts (a.k.a. inter vivos trusts) as the solution to all estate planning issues. The alleged benefits are asset protection, avoid probate, and evade taxes. Take these with a grain of salt. In most instances, creditors can and will go after assets, probate is necessary, and tax evasion brings the I.R.S. knocking at the door with assessments, penalties, and sometimes with handcuffs.
Does this mean that business owners should avoid living trusts? Of course not. Just avoid professionals who claim that a living trust is always the best estate planning device.
In some cases, a living trust is a legitimate part of estate planning. For example, living trusts can provide some privacy, speed up asset transfers at death, and make it harder for disgruntled heirs to challenge asset distribution. But there are additional costs associated with these trusts and probate of a will is often a simple matter.
More importantly, a will is often needed even if there is a living trust.
If a person has assets not in the trust, and there is no will, the government decides who gets what.
And even if these non-trust assets are not that important, what about minor children and family pets? If there isn’t a will in place, state law decides where they go. This means that an unfit (or greedy) relative can get custody of the kids and the dog may end up being put to sleep because no financial and custody arrangements were made.
To protect business and family, consult with an experienced estate planning professional. Never take the word of someone who says that a living trust solves all estate planning needs without seeking a second opinion.