(MONEY Magazine) – Who would actually want to die without a will? Your financial plan, no matter how carefully crafted, would be forgotten, your assets would be disposed of according to a rigid legal formula, and your estate might be needlessly diminished by taxes. The problem with a will is that it must be proved valid in probate court. Your heirs may have to wait four months to two years for their inheritances, depending upon the efficiency of your executor and the local court. The procedure can drag on even longer if your survivors squabble over who gets what. Since wills are public documents, the fact that you disinherited your ne'er-do-well son could make the local scandal sheet. If you own property in more than one state, your heirs may have to deal with two or more probate proceedings. Worse yet, 5% to 10% of your legacy will be lost to court costs, attorney's and executor's fees. Though probate procedures and fees are less onerous in some states than others, you can spare your heirs those nightmares by establishing a living -- sometimes called an inter vivos -- trust. (A living trust shouldn't be confused with a living will, a document in which you formally, and in some states legally, express your wish to forgo extraordinary medical treatment when you become terminally ill.) Property placed in a living trust bypasses probate, as does your share of assets that are jointly owned or have named beneficiaries, such as pension and profit-sharing plans, Individual Retirement Accounts and life insurance policies. Even if you establish a living trust, you will still need a simple will. The chief reason: you cannot use a trust to name a guardian for your minor children. In addition, your will should include a pour-over clause stipulating that any property that you forgot to place in your trust should go there after your death. These assets will be subject to probate, but the process shouldn't be lengthy or expensive, assuming you shifted most of your property to your trust before your demise. That's because most states have simplified probate procedures for small estates that can take as little as a day or two to complete and may not even require the services of a lawyer. The definition of a small estate varies by state, with limits ranging from $500 in New Hampshire to $60,000 in California. To find out what the ceiling is in your state, ask an attorney who specializes in estate planning or call your local probate court. Though a book glorifying living trusts, Norman Dacey's How to Avoid Probate!, has sold more than 1.5 million copies over the past 25 years, many people still shy away from these instruments. ''People think they're too complicated and expensive and intended only for superrich families like the Kennedys and Rockefellers,'' says Theodore E. Hughes, an assistant attorney general in Michigan and co-author of The Complete Guide to Wills, Funerals and Probate (Scribners, $12.95). ''That's not true, but it's difficult to educate the public.'' Indeed, the price of a living trust shouldn't break the bank. For a modest and uncomplicated estate, a living trust and a will with a pour-over clause cost about $400 to $1,000. A simple will runs $50 to $200. Living trusts may be revocable or irrevocable. But revocable ones are preferable because of their far greater flexibility. For instance, you can keep any or all income a revocable trust produces, change its provisions or terminate it. Many people even act as their own trustees. As a result, trust income is taxed at your rate (and reported on your tax return if you or your spouse serves as trustee). In addition, property in a revocable living trust is included in your taxable estate. If, on the other hand, you create an irrevocable living trust, you cannot control property in it. If you serve as trustee you can act only as an administrator; you cannot change the trust's provisions. Since you part with your assets forever when you place them in an irrevocable trust, they are not included in your taxable estate unless you receive income from the trust. But there are better ways to avoid or reduce estate tax that don't require you to relinquish control of your assets during your lifetime, as outlined in ''A Short Course in Estate Planning'' on page 74. After your death, a revocable living trust can remain intact for the benefit of your heirs, or it can terminate with assets distributed to those same survivors. Your wishes, which you set down in your trust document, are carried out by a successor trustee of your choice. A relative, friend or one of your beneficiaries may agree to perform this service free; banks and trust companies generally charge a fee equal to 2% of the assets distributed. There ) are no fees associated with living trusts during your lifetime unless you hire an institution, attorney or a professional money manager to act as your co- trustee. Even those fees seem reasonable compared with the expense of probate. Traditionally, attorneys' fees have been based on the size of an estate or dictated by local custom. Only 13 states have set fee schedules, usually 1% to 11% of an estate's gross value. Generally, fees consume greater percentages of smaller estates. In California, for example, a lawyer handling a $100,000 estate would earn at least $3,150, or 3%, and $61,150, or 2%, for probating a $3 million estate. The attorney could charge additional fees for selling assets, preparing an estate tax return or defending the estate against claims by creditors or disgruntled survivors. Says John McCabe, the legislative director for the National Conference of Commissioners on Uniform State Laws: ''The probate process has been a cash cow for attorneys. Small law firms pay their basic office expenses with probate fees.'' You can obtain a fee schedule from your county's probate court. Unlike a will, a living trust can also shield your estate from creditors. With a will, your executor is required to notify your creditors of your demise by mail and newspaper advertisement so they can submit their claims against your estate. If you placed your assets in a living trust, however, no such publicity is necessary. But you can't escape your creditors during your lifetime by transferring your assets to a revocable living trust. (They would be safe in an irrevocable living trust that you don't benefit from, though.) Say, for example, you cause an automobile accident and are liable for damages that exceed your insurance coverage. In most states, assets in your revocable living trust could be attached to satisfy court judgments against you. Privacy is another advantage of living trusts. Nosy neighbors cannot find out how you apportioned your assets. In fact, the terms of your trust may become public only if someone objects to your provisions or lack of provisions for him or her. That's unlikely, however, because it's more difficult to contest a living trust than a will. Instead of filing a challenge against your estate in probate court, an unhappy survivor must sue your successor trustee as well as your beneficiaries. Another benefit: you can serve as trustee while you are in good health, but your successor trustee can take over if your physician certifies that you are no longer mentally or physically capable of managing your money. This arrangement is less costly and time consuming than a court-appointed conservatorship. A conservator must make an annual accounting to the court and may have to get its approval to make major expenditures or investments. Your successor trustee, on the other hand, simply follows the wishes you have set down in your trust document. Once you decide to set up a living trust, you must transfer title to all your assets to it. Your attorney should handle the paperwork required to shift your house and other real estate into your trust. He or she should also prepare a document called an assignment of personal property to transfer personal possessions to a living trust. Standard legalese covers appliances, furniture and other household goods, but you should list valuable antiques, art and jewelry separately. It's ordinarily up to you to put the rest of your assets in your trust unless you want to pay for the time it takes for your lawyer to do this. To transfer bank accounts to your trust, for example, you must have your banker retitle your existing accounts or open new ones. The easiest way to transfer stocks, bonds and other intangible investments is to have your broker open a new account in your trust's name and place your securities in it. If you intend to trade on margin or buy and sell options, say so in your trust document. You can transfer motor vehicles by applying for new titles at your state's motor vehicles bureau. Special rules apply if you live or have lived in Wisconsin or a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington). In those states, all income earned and assets acquired during marriage, except for individual gifts and inheritances, is considered community property. Each spouse shares equally in this property, so half of it is included in each spouse's estate. There's no problem if spouses agree to transfer community property to a trust created for their mutual benefit. But if you want to put community property in a trust that benefits only you, your partner must agree to give up his or her rights to the property. If you're intrigued by living trusts but hesitate to set one up because of legal costs, consider the advice of Alexander A. Bove Jr., a Boston attorney who specializes in estate planning: ''You may think you're saving money by using a 50 cents form to draft your own document, but lawyers will collect big fees later when your survivors dispute the validity of your do-it-yourself trust.''