A Delaware living trust bypasses probate and can ensure that your assets and property transfer promptly to your loved ones after you die. The costs of setting up a living trust can be high, though, so the estate planning tool does not make sense for everyone. Read on to find out if it’s the right option for you and to learn everything else you may be wondering about living trusts in Delaware. For more help with your estate planning, use SmartAsset’s matching tool to find a financial advisor near you.
How to Create a Living Trust in Delaware
To create a living trust in Delaware, follow these six steps:
Like a will, a living trust is a legal document that assigns who should receive property when the owner (or trust grantor) dies. Unlike a will, it’s also an entity that holds the assets while the owner is alive. The primary aim of a living trust is to avoid probate, a court process that can take months and even years if the estate is especially complicated.
The grantor appoints a trustee to manage the assets in the trust. People commonly name themselves as the trustee, but when they do, they also need to name a successor trustee for when they die. If the distribution of your property is not to happen immediately after your death or if the beneficiary is disabled, the trustee will manage the assets for as long as necessary.
You can fund a trust with various types of assets and physical property including:
One thing you can’t transfer to a revocable living trust is a traditional individual retirement account (IRA). By law, an IRA must be in the name of a person.How Much Does It Cost to Create a Living Trust in Delaware?
The largest expense when creating a living trust is attorney fees. Depending on the lawyer, they can run to $1,000 and beyond. If you want to keep costs down, there are online programs available for less than $100. Keep in mind, though, that you can run into plenty of pitfalls with DIY estate planning.
The other major costs are related to retitling assets, which can include transfer taxes, deed preparation fees and county recording fees.Why Get a Living Trust in Delaware?
One of the biggest benefits offered by a living trust is bypassing probate. This is the process by which a court determines how to treat your estate based on its interpretation of your will. Delaware has not enacted a Uniform Probate Code, so the process is considered lengthy. And it can end up being expensive, as lawyer fees add up.
That said, the state has a simplified probate process for estates valued at below $30,000.Who Should Get a Living Trust in Delaware ?
Living trusts are not just for the wealthy. You should consider a Delaware living trust if your net worth is more than $30,000, if you own property in other states or if you simply want your estate to avoid the interference of the court.
Additionally, trusts are a good choice for people who want to provide for someone with special needs or who want to delay the distribution of their estate until heirs are, say, 30. (With wills, estates are distributed once probate ends.) A living trust is also recommended if you are disinheriting someone or spreading your wealth in an unequal way. (A living trust is harder to contest than a will.)Living Trusts vs. Wills
Wills are always recommended, whether you have a living trust or not. The two combined can ensure that all of your estate is distributed as you wish, since you’ll likely leave something out of your trust. A will also offers some benefits a living trust won’t. For instance, you can state your preferred guardians for minor children and name an executor through your will. You can also use it to express how you want debt and taxes to be handled.
The table below offers some information about what you can and can’t do with these two estate planning tools.Living Trusts vs. Wills Living Trusts Wills Names a property beneficiary Yes Yes Allows revisions to be made Depends on type Yes Avoids probate court Yes No Requires a notary Yes No Names guardians for children No Yes Names an executor No Yes Requires witnesses No Yes Living Trusts and Taxes in Delaware
The Delaware estate tax was repealed on January 1, 2018, and the state has no inheritance tax either. At the federal level, a living trust may help only very large estates, since the federal estate tax (also called the death tax) has an exemption of $11.4 million for individuals and $22.8 million for married couples. (These exemptions, set by the Trump Tax Plan, are scheduled to expire in 2025, though. So it’s a good idea to keep an eye on them.)The Bottom Line
A living trust will help your heirs avoid probate in Delaware, which has not adopted the Uniform Probate Code, if you have a large or otherwise complicated estate. If the value of your estate is less than $30,000, however, a living trust is unnecessary, since there is a simplified process for small estates. For more help with your estate planning, consider hiring a qualified financial advisor and discuss all the types of trusts you have access to.Estate Planning Tips
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