It is not uncommon for supporters of living trusts as a means for distributing one's estate to compare the often high cost of probate to the cost of creating a Revocable Living Trust.  Depending on the state you live in and the complexities of your estate, Probate can consume anywhere from 4% to 10% or more of your gross estate, (before debts are paid), based on a comprehensive study by AARP.  A decent Revocable Living Trust  might run from $1,200 to $2,500 more or less.  It seems clear that the cost of setting up a living trust is much less than the cost of allowing your estate to go through probate.   But, is that the only measure of cost you should compare?

Some would argue that a Living Trust should be managed by a professional, or corporate trustee and they charge fees commensurate with executors fees for a Will going through Probate.  There can be many reasons why the services of a corporate trustee would be preferable to using a family member,  however, in most cases, trusted family members can and do successfully settle trust estates without undue complication.

Unless the Settlor pre-determines the fees that may be charged by an individual or professional for managing and settling a Trust,  a typical trust will usually allow for “Reasonable Compensation by a Trustee”.   Reasonable compensation is often a standard approach since the courts have essentially defined that term to be the fees usually and customarily charged by professional corporate trustees in the geographic area where the Settlor died, or where the Trust administration is to take place.  It varies a little from here to there but is generally around .75% to 1.75% of assets under management on an annual basis (if the trust is managed for beneficiaries over time as opposed to being all distributed outright).

There can be additional fees associated with real estate commissions, brokerage fees to liquidate real estate or stocks, tax preparation fees from an accountant… all of which can generally apply anyway whether you are dealing with a Probate or a Trust.   The key expense items that usually are not part of a Living Trust's settlement are court costs and attorneys fees.

Here is something important to note… most successor trustees who are beneficiaries DO NOT charge any Trustee Fee (maybe just reimbursement for out of pocket expenses)… The reason being that trustee fees are taxable to them… inheritance is not.  Sometimes taking a fee is warranted by a beneficiary who is acting as a Successor Trustee,  but it usually the exception more than the rule.

The bottom line is that a properly prepared and funded living trust, even if administered by a Successor Trustee who is a paid Corporate Trustee, should still be significantly more economical than the cost of Probate Administration in most cases.  In the wider analysis, the comparison of costs should not be the only factor looked at.  You should also look at the length of time each method will take, the likelihood of any heirs who might seek to contest your wishes, and the short and long term needs of the beneficiaries.