Money Watch: Should I have a living trust?

— -- Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisorsanswering reader questions about saving, protecting and growing your money. To submit a question, e-mail USA TODAY personal finance reporter Christine Dugas at: cdugas@usatoday.com.

Q: What are the benefits of a living trust, and what is the easiest, most cost-efficient way of creating one?

A: Unlike a will, which comes into play after you die, a living trust is established during your lifetime and allows you to make changes and provides peace of mind.

If you become unable to handle your own affairs, a living trust states who will act on your behalf. If you don't have a living trust, someone may have to file a petition in state court, asking a judge to appoint a conservator.

This may require medical testimony and, if your family members disagree, the judge may appoint a trust company or an unrelated person to serve as your conservator.

A living trust can also save the expense of probate, the court-supervised process of paying your debts and distributing your property to the people who inherit it.

Probate can drag on for months before the inheritors get anything. If your estate holds out-of-state real estate, it also avoids further probate in that state.

But a small estate may not need a living trust if it can qualify for "simplified probate," which is a streamlined process for estates where no attorney is needed. The executor can distribute assets without jumping through hoops.

States vary on the maximum estate that qualifies for simplified probate, from $15,000 in Massachusetts to $150,000 in California.

Joint accounts, retirement plan benefits, life insurance and jointly owned real estate can pass directly to the joint owner or beneficiary without involving probate; so the remaining assets may fall below the threshold to qualify for simplified probate.

While do-it-yourself websites and programs exist, you should have an attorney draw up your living trust. It does cost money and sometimes complicates matters. So you need to determine if it is worth it.

William Baldwin, NAPFA-Registered Financial Adviser

Pillar Financial Advisor, Waltham, Mass.

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