What Is a Living Trust and Why Consider One?
Estate planning is a critical step in securing your family’s financial future, yet many people put it off, thinking a simple will is sufficient. However, a living trust offers significant advantages that a will alone cannot provide. A living trust is a legal document that, like a will, contains your instructions for what should happen to your assets when you die. Unlike a will, however, a living trust can avoid probate at death, control all your assets, and prevent the court from controlling your assets if you become incapacitated.
Avoiding Probate: Saving Time, Money, and Stress
One of the primary benefits of a living trust is avoiding probate—the legal process through which the court ensures your debts are paid and assets are distributed according to your will. Probate can be expensive, with legal fees, executor fees, and other costs that must be paid before your assets can be fully distributed to your heirs.
The probate process typically takes nine months to two years, sometimes longer. During this time, assets are often frozen, preventing your family from accessing funds they may desperately need. If your family requires money to live on, they must request a living allowance, which may be denied.
With a living trust, assets can be transferred directly to your beneficiaries without going through probate—benefitting your loved ones by saving them time, money, and hassle.
Protecting Your Family’s Privacy
Privacy is another significant advantage of a living trust. Probate is a public process, allowing any “interested party” to see what you owned, whom you owed, who will receive your assets, and when they will receive them. This public exposure can invite disgruntled heirs to contest your will and expose your family to unscrupulous solicitors.
Because trust assets don’t have to go through probate, details about your estate remain private, protecting your family’s financial information from prying eyes.
Maintaining Control During Incapacity
If you can’t conduct business due to mental or physical incapacity (dementia, stroke, heart attack, etc.), only a court appointee can sign for you—even if you have a will, since a will only goes into effect after you die.
When you set up a living trust, you transfer assets from your name to the name of your trust, which you control. Legally you no longer own anything; everything now belongs to your trust. So there is nothing for the courts to control when you die or become incapacitated.
A revocable trust can help your family if you become ill or unable to manage your assets. If that happens, your trustee can make distributions on your behalf, pay bills and even file tax returns for you.
Flexibility and Control Over Your Assets
If you choose to create a revocable trust, you can change the terms of the trust agreement at any time by executing an amendment to the document. This allows you to be adaptable and flexible to life’s changing circumstances.
As trustee of your trust, you can do anything you could do before—buy and sell assets, change, or even cancel your trust. That’s why it’s called a revocable living trust. You even file the same tax returns. Nothing changes but the names on the titles.
Protecting Your Beneficiaries
Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age(s) you want them to inherit. Your trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, spouses, and future death taxes.
A trust gives you greater control over how and when your assets are distributed to your beneficiaries. In your trust document, you can outline specific terms—or guidelines—for your trust, so your property is handled exactly how you want it to be after you pass away.
Avoiding Multiple Probates for Out-of-State Property
Transferring property into a revocable trust can help you avoid certain probate issues involving out-of-state property. If you have real estate in two or more states, out-of-state property requires what is called an “ancillary proceeding” in the state where the real estate is located. This is expensive and time consuming, and it is usually a hassle.
To minimize estate settlement costs yet provide for a surviving spouse, a trust might be utilized. One appropriate reason for living trusts is privacy. When an estate is settled, property being transferred, along with its appraised value, is often listed in the newspaper and at the county courthouse. However, if the property has already been transferred to a trust, it is not owned by the deceased at the time of death; therefore, it is not listed in the newspaper or at the courthouse.
Is a Living Trust Right for You?
Age, marital status, and wealth don’t really matter when considering a living trust. If you own titled assets and want your loved ones (spouse, children, or parents) to avoid court interference at your death or incapacity, you should probably have a living trust.
It’s important to work with an advisor to evaluate the pros and cons of a revocable living trust before deciding whether it is the right choice for your situation.
Taking the Next Step to Protect Your Legacy
Creating a living trust is a significant step toward securing your family’s future and ensuring your wishes are carried out efficiently and privately. While the initial setup requires some time and financial investment, the long-term benefits far outweigh the costs when compared to the alternative of court intervention during incapacity or after death.
Don’t wait until it’s too late to put proper estate planning measures in place. Contact our experienced estate planning attorneys today to schedule a consultation and learn how a living trust can be tailored to your specific needs and goals. Your peace of mind and your family’s security are worth the investment.
