|Thanks Gwendal Uguen, for Creative Commons use of your pic!|
A common myth I run into is that everyone should have a living trust. A related myth is that having a trust (but not funneling all assets into that trust either during or lifetime or setting them up to distribute to the trust upon your death) will guarantee that you will not have a probate.
First, let me lay out a golden rule of organizing your estate. If you are told by a professional "everyone needs [x]". Run from them. Everyone's assets, tax liability and family dynamic are different. Work with a professional who will take your particular needs and balance them against the cost of creating and managing particular types of planning tools. [Rant over].
A trust can prevent probate, but doesn't necessarily guarantee that a probate won't be needed. What matters is what assets are your probate assets. For example, if you set up a trust, but don't have your real estate assets retitled in a way that gets those assets out of your probate estate, those assets alone will trigger a probate. Even if you and the professionals you work with get all of your assets into or set up to automatically go into your trust, if you don't do the same with new assets, you might have a probate. It's a great tool to minimize the likelihood of a probate process, but there's a lot more to avoiding probate than simply creating a trust.
In Minnesota, a trust won't always be cheaper or easier to deal with than a probate. In some states, probates mean going in front of a judge, which costs the estate both in time and money. they may have other costly requirements that apply to most or all estates. If you live in one of those states, the cost of creating and managing a trust may look pretty good compared to probate. In Minnesota, most estates go through an informal process that can cost less than creating and managing a trust. That's something to keep in mind when you hear "everyone needs a trust", particularly if they aren't from Minnesota.
There can be some great uses for a trust. Maybe you don't want your distributions to be in a public probate court file. Maybe you know your kids will have costly probate court fights. Maybe you want the simplicity of giving one person control of your real estate while a group of people receive the benefits. Maybe your estate is large enough that both you and your spouse need both of your estate tax exemptions to prevent estate taxes. For people in those situations, the costs of creating and managing a trust can absolutely be worth it.
Not everyone needs a trust. However, for people who want to keep their distributions confidential, expect an heir to contest their gift, need to ensure particular management of assets over a long period of time or need an option to use both spouses' estate tax exemptions, trusts can be a valuable tool. Myth (sort of) busted.