Millions of words—and millions of resort-hotel continental breakfasts—have been spent on building the popularity of living trusts. Consumers will have no trouble finding a seminar on living trusts near them this week, sponsored by a lawyer, insurance agent, financial planner or senior adviser. Those who attend are likely to be persuaded that they need to sign up for a living trust immediately. Is it just hype, or the real deal? As it happens, the answer is almost always more straightforward, and less terrifying, than the seminar promoter is likely to let on.

There are a handful of reasons most individuals and couples ought to consider living trusts, but for the vast majority the bottom line can be summed up in two words: probate avoidance. Few people need to worry about estate taxes , which are now only charged against estates of over $2 million. Though the limit is scheduled to drop back to $1 million in 2011, everyone agrees that is extremely unlikely—and even if it does a tiny fraction of decedents’ estates will be subject to taxation.

So how important is it to avoid probate? As it turns out, in most states (including Arizona) the probate process is significantly less expensive, invasive or time-consuming than its reputation would suggest. Contested probate proceedings are quite rare (and contested trust proceedings increasingly common, so that there may be little difference between the two estate planning choices). In most states the fees charged by lawyers must be based on the work actually performed, rather than a percentage of the estate; that has the effect of reducing the cost to perhaps a third of what it might have been under former rules. Little public disclosure is required or provided in most cases.

All of that simply means that the cost of probate avoidance needs to be weighed against the cost of probate itself. In most cases individuals who create living trusts will end up saving their heirs money—but perhaps not so much that it makes the argument in favor of living trusts compelling. Remember—it is a rare case in which the cost of establishing and funding a living trust will be recovered in the individual’s lifetime; you will be spending your money now to save your heirs somewhat more later.

If probate avoidance is important there may also be other, less expensive, options available. “Payable on death” (POD) accounts, beneficiary designations and even beneficiary deeds can help transfer assets outside the probate process.

All that said, there are still individuals who ought to strongly consider planning with living trusts. Disabled (or spendthrift) children? Real estate in more than one state? Those types of issues make it even more important that you seek individualized legal advice. What you are looking for is a simple cost-benefit analysis: how many dollars will you spend today, and what is the best guess about the savings for your heirs later? If the first figure looks small in comparison to the second one, you might want to consider a living trust. But don't be too impressed with the figures about how much Elvis Presley's, or Walt Disney's, or Marilyn Monroe's, estate paid in what the living trust salespeople usually call "estate shrinkage." Your estate is unlikely to be as large, complicated, contested or expensive as any of those famous and tragic figures. And after your resort hotel breakfast or lunch (wait until you've been fed), you might raise your hand and ask: "So, if Chief Justice Warren Burger had signed a living trust, how much would that have saved him in 'estate shrinkage' costs?"

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