Is a living trust the only way to avoid probate?
No. There are numerous ways to do so. For example you can name a beneficiary of your life insurance policy, retirement plan, or annuity.
In fact, in Illinois, you can name a beneficiary of practically anything. You can name a beneficiary of your car (go to http://www.cyberdriveillinois.com/publications/motorist/titlereg.html and click on “Beneficiary Affidavit”), your home (Transfer on Death Instrument), your bank account (Pay on Death) or your brokerage account (Transfer on Death).
If your estate is small enough your heirs may be able to use a Small Estates Affidavit. The dollar limit is $100,000 but other conditions apply. If you qualify, a full probate is not required.
The advantage of a living trust over all these methods is that a properly designed trust not only avoids probate on your death, but also on the eventual death of the beneficiary. In addition, a properly designed trust can protect inherited wealth from the beneficiary’s creditors, divorces, or bankruptcy.
Most of all, and a major reason why many people plan using trusts, is that you get to determine who inherits on the death of the beneficiary. If you simply name a child as beneficiary and say nothing more then on your child’s death your wealth will most likely go to your in-law. You could inadvertently disinherit your grandchildren. Trust planning can make sure your grandchildren inherit upon the death of a child.