What Is A Living Trust?
It is common for many probate and estate planning attorneys to say that everyone should have a trust, yet many Americans don’t have a simple handwritten will. Trust can cost thousands of dollars in legal fees, that is why consequences that come with such decision should not be taken lightly. The following are considerations when you do not have a proper trust.
Living Trust vs. Will
A living trust or Inter-Vivos is a trust document written while you are alive where transfer of assets, including retirement accounts, insurance policies, and other property, is stated, to a trust for your benefit while you are alive and upon your death, those assets will be transferred immediately to designated beneficiaries by an individual known as the “successor trustee”. While a will, is a document where assets are distributed by an executor to your named beneficiaries in a process known as probate. A will take effect upon your death, a living trust is a document that takes effect immediately while you are alive.
General Benefits of a Living Trust
A living trust allows you to use during your lifetime the property for you and your family’s benefit. Nearly all living trusts are revocable by the grantor (you), thus you can change the terms of trust whenever you would like. Furthermore, while you transfer title to the property, accounts, or other monies to the trust, you retain control over the use and disposition of those assets. Additionally, a living trust allows some flexibility in how you can manage that property. You may name another person trustee over the trust assets, and you can collect the income from those endeavors. The trustee also has a fiduciary duty to do what is in the best interests of the trust, and thereby you, when managing your affairs in this way. A living trust is also usually easier to modify than a will, which requires extremely specific formalities to execute or change wills.
A living trust, as mentioned allows flexibility in managing your affairs. But this flexibility is specifically important if you become ill or incapacitated. There is no one that can immediately take over if you have a will without a strong power of attorney. This may lead to an expensive, court-appointed, guardianship over you and your assets, and you have little control over this appointment as a will only takes effect upon your death. A living trust allows another individual, known as a successive trustee, to immediately take over the trust and your affairs without having to go to court. In addition, you can name a successor trustee/trustees in your living trust, giving you peace of mind and full control of who may make decisions on behalf of you in the event of illness or incapacitation.
Privacy is another benefit of a living trust. In the case of a will, upon your death, the will is entered into probate and a list of your assets and debts will be made public. The executor of your estate will distribute your property and pay the debts of your estate according to the terms of your will and the state’s probate process. Nonetheless, a living will allow the successive trustee to pay debts and distribute the property according to the terms of your trust with much more discretion and privacy as there is not typically a public record of the trust’s assets.
Another benefit of a living trust is useful when there is property in another state, this property can be transferred according to the terms of the trust and not through a separate probate process or action in the state where that property resides. In the case of a will, your executor will have to submit the will through probate for that out-of-state property.
There are many other advantages, and some disadvantages, to a living trust. Your individual circumstances, assets, and desires are important to discuss when deciding if a living trust is right for you. Talking with a qualified attorney about your situation is important so the best decision can be made with the correct information.
There are many other advantages, and some disadvantages, to a living trust. Your individual situations and circumstances should be taken into account in deciding whether a living trust is right for you.