Ask the Expert: Will vs. living trust

My estate is valued at $1.5 million. Should I have a will or a living trust? 

It depends on your circumstances rather than on the size of your estate.

When you opt for a living trust, you must transfer your assets into it. During your lifetime, you're the trustee and your heirs are trust beneficiaries. When you die, the trust assets aren't subject to probate -- the legal process in which a court validates a will. But this isn't the big advantage it's cracked up to be.

First, jointly owned assets and assets with named beneficiaries already avoid probate. Second, in New York probate is inexpensive and takes only a few weeks; the maximum court fee is $1,250, and legal fees for filing probate documents are modest. Third, contrary to popular belief, a living trust doesn't reduce taxes or the legal bill for administering your estate.

But a living trust makes sense if you're in poor health and want a co-trustee to manage your affairs if you're incapacitated, or if you own out-of-state real estate and don't want your survivors to have to go through probate in more than one state. It's also sensible if you're an orphan, unmarried, and childless, and have lost touch with your relatives.

The reason: Before a will is probated, all potential heirs must be notified. If you have a spouse or kids, notification stops with them. If not, your potential heirs include your siblings, nieces, nephews, aunts, uncles and cousins.

No problem if they're easily located -- but if not, your executor must spend time and money searching for them. With a living trust, you avoid this hassle; no prior notification is required before assets are distributed to beneficiaries.

The bottom line Whether you need a living trust depends on your situation, not the size of your estate.