Many people decide against creating a trust because of its upfront fees. Unlike wills, which you can draft for around $150, trusts often cost between $1,000 and $1,500 to set up. Yet, you may feel the investment is worthwhile because a trust will offer you privacy that a will does not. And it may end up saving you – and your beneficiaries – money in the long run.
The financial benefits of trusts
The upfront cost of drafting a will is low. But creating one may prove costly down the road because it must go through probate court. At the beginning of probate, your executor must prove your will before distributing your assets and following through with any other intentions you have. This process can prove lengthy, especially if your assets are difficult to track down or if beneficiaries challenge your will. Your estate will likely lose between 3% to 7% of its total value through probate, if not more.
Unlike wills, trusts can avoid probate. This arrangement works because you will title your assets in your trust’s name during your lifetime. The trust then owns these assets, but you can still access and manage them as its trustee. Since your trust will survive you one you pass, and since it qualifies as a separate entity, any assets in its ownership are not subject to probate and its associated costs.
The privacy benefits of trusts
Creating a trust will also allow you privacy that wills do not. Through probate, your will becomes a public document, which makes it easier for someone to examine and contest it. Yet, a trust remains private; its assets and beneficiaries are hidden from the public eye. The privacy of this arrangement gives you more control over your personal and financial affairs.
Because trusts avoid probate, they can offer you savings and privacy that a will does not. As you consider creating one, an attorney can help you determine whether it makes sense for your circumstances.