Benefits of a Living Trust
Benefits of a Living Trust
A living trust is a great way to manage your assets and make sure that the people and causes you care about most are provided for.
The living trust has become an increasingly popular estate planning tool. This tool not only gives you the power to choose how your property is handled now, but also lets you decide how it’s distributed after your death.
Understanding the benefits of a living trust and its drawbacks can help you to decide if a trust is right for your needs.
What Is a Living Trust ?
In estate planning, a living trust is a legal arrangement you can use to distribute your assets after your death. As you establish the trust during your lifetime, it is called a ” living trust”.
The person who generates a living trust is called a grantor. By transferring property and assets to the trust, the e grantor fills or funds the trust.
The grantor along with appoints a trustee to manage the trust. At last, they choose beneficiaries – the people or organizations who will finally receive the trust’s assets.
Types of Living Trust.
A living trust holds the assets of the trust creator during a trust for his or her profit throughout their lifetime. Then, after the death of the trust creator, the assets are transferred to designated beneficiaries by the “successor trustee”, the person who has been chosen by the trust creator to do so.
There are two types of living trusts
- Revocable trusts
- Irrevocable trusts
Revocable Living Trusts (RLTs,) are more popular and allow for greater flexibility during your lifetime. You will be able to easily transfer assets to and from an RLT, or may be cancel the trust altogether.
Irrevocable trusts are more rigid. Whereas they can be modified, the method is often more complicated.
The top benefits of a living trust are :
1 .A Living Trust Avoids Probate
Probate is the court-supervised method of distributing a deceased person’s estate. Depending on the estate, as well as the assets and individuals involved, probate will become a lengthy and costly process, which may not only delay distributions to your beneficiaries but also slow down on what they inherit.
By placing your property in a living trust, you can avoid probate as the successor trustee distributes assets according to the trust creator’s instructions except court intervention.
This can mean
A faster distribution to your heirs.
Reducing the time frame from months or years to just weeks.
Without any further expenses to the estate .
The escape of probate may be particularly helpful if you own property in another state, as it would pass directly to your beneficiary and not be subject to probate in that state.
2 .A Living Trust May Save Money
A living trust can save money by ignoring probate expenses at your death.
Living trusts are also likely to hold up better than a will in the event that someone come forward to contest the distribution, which can also save your estate money.
With regards to the initial cost, however, making a living trust is likely to be more expensive than creating a last will and testament.
A living trust is a more complicated legal document that needs more actions because you also must “fund the trust” with your assets, that is, transfer ownership of your property to the trust. You may also want to change the beneficiary on your life insurance or IRA or 401(k) plan, each of which needs separate paperwork.
Living trust may provide savings for married couples in the form of joint living trusts, but usually, there is not much difference in estate and income tax savings with a living trust.
3. A Living Trust Protects Your Privacy
The avoidance of the probate process is one of the benefits of a living trust.
A living trust is a private document between the parties involved and doesn’t become part of the public record. In other words, later no one can go and search public records to find out more about the distribution of your estate.
On the other hand, a will is a public record, therefore everything in it becomes public as well.
4. A Living Trust Assists in case of Incapacitation
If you become incapacitated or ill, the person you have choosen as successor trustee can step in and manage your affairs without the intervention of a court.
In this way you can prevent a court-appointed guardian for your affairs.
Moreover, as a living trust is revocable, you can dispute the implication that you are incapacitated and retain control of your own affairs.
5. Have greater control and flexibility
A trust provides you greater control over when and how your assets are distributed to your beneficiaries. In your trust document, you can outline specific terms or guidelines for your trust as a result your property is handled accurately how you want it to be after your death.
For instance, if your beneficiary is your minor child, you might want their trust assets used for a specific purpose or occasion, like if they go to the college or when they reach a certain age.
Revocable living trusts are also flexible. You can easily make adjustments to your revocable living trusts, if your estate planning goals, circumstances or even the people in your life change.
In some cases you can also make changes to an irrevocable trust, but the process is more complicated. If you have questions regarding your business irrevocable trust, it is best to talk to an estate planning attorney.
6. A Living Trust Provides Certainty and Peace of Mind
When write up correctly, a living trust describe a clear plan to deal with all of your assets. This can help you prevent from unintentionally disinheriting someone, can help you provide care for a loved one with special needs into the future, and also protect assets from certain people. All of these things can offer you peace of mind now, knowing that your estate will be handled exactly as you wish later.
The existence of trust can also provide certainty and comfort to your loved ones during an already stressful time because you have laid everything out for them.
7. Protect your assets during your lifetime
A trust can help you plan for what happens after you die, it can also help you plan for the “what ifs” during your lifetime, such as if you fall ill or become incapacitated.
Your trust documents can help you to plan for these unexpected situations. Among them, you can give instructions for how your trust managed, including if trust funds should be used to pay for your care. This empowers your chosen successor trustee to handle not only your care, but also your estate including distributing trust funds according to your wishes, paying your bills and filling your taxes .
Disadvantages of a Living Trust
Living trust officer several benefits, but trust may not be the best option for everyone. You will want to consider certain factors when deciding whether or not a living trust is right for your situation, such as :
If you hire an estate planning attorney to create or manage your trust for you, then trust can be more expensive than a will.
There may be other fees involved in creating and maintaining a trust, depending on the type of trust you have and the state you live in.
Such fees are :
- Setup fees
- For real estate or vehicles, title transfer fees
- Income taxes generated by trust assets (like stocks or certificates of deposit)
- Paying the trustee to manage the trust
- The fees of an accountant or financial advisor
Costs like title transfer fees are required, but paying your trustee or hiring a financial advisor can be optional,
If you have questions about what fees are required in your state, talk to your local court or an estate attorney.
B. Ongoing Management
A trust also requires more active management than a will. Because you are required to transfer any new assets you receive to the trust throughout your lifetime. If you don’t, these assets will have to go through the probate process before your beneficiaries can claim them.
The trust may also require additional work if you move to a different state or choose to change any provisions or rewrite ant terms.
While these actions are not difficult, they can take time and require detailed rerecord-keeping.
C. Extra Paperwork
Trust documents are fairly lengthy, As trust documents contain important details about your trust, they are fairly lengthy.
In addition to creating your trust document, you will also need to fill out paperwork to transfer ownership of your assets to the trust.
For example, let you want to transfer your house to your trust. For this, you’d have to prepare a new contract that names the trust as the home’s owner.
Is a Living Trust Right for You ?
While it comes to estate planning, a living trust can provide many benefits to both of you and your loved ones, from having your assets avoid the lengthy probate process to providing peace of mind when you become incapacitated.
Based on your unique circumstances and goals, selecting to set up a trust is a personal decision.
An estate attorney can offer guidance and advice, for more complex estates.
In addition to a trust, it is a good idea to also have any property not included in your trust that is protected and distributed according to your wishes after your death.
Else, the courts will decide what happens to any assets which not transferred to a trust or included in a will according to the state law.
Although you decide not to make a trust, consider making a last will and testament.
Determining Which Is Better: a Trust or a Will
Before deciding, it is important to understand the difference between living trust and will.
The biggest difference is that a will has no effect on your property while you are still alive and only takes effect after your death.
An important benefit of the living trust is that it will not have to go through the probate process, but a will must have to go.
In combination with a living trust, to catch any assets that have unintentionally been left out you should have a “pour-over will”. This would ensure that your property does not fall subject to state intestacy laws, which mandate the distribution of assets not covered by a will or trust. The pour-over will have to go through probate.
As a will becomes a public record it doesn’t provide no privacy.
Ready to Make a Living Trust ?
If you have decided that you are ready to create a living trust, you can get started immediately by taking an inventory of your assets, thinking about who you want to inherit, and also carefully considering who you will choose as your successor trustee. Since now you can find living trust forms online to streamline the process, therefore setting up a trust doesn’t have to be complicated or time-consuming.
After answering some simple questions, you will be well on your way to incorporating a living trust into your estate plan and to enjoy better peace of mind about your estate in general.