A Living Trust, Just What Is That?
Many probate and estate planning attorneys act as if everyone should have a trust yet most Americans don’t even have a simple hand written will. Given that trusts can easily cost thousands of dollars in legal fees, it’s a big purchase that shouldn’t be taken lightly, consider the consequences if you do not have a proper trust:
Living Trust vs. Will
A Living Trust (or inter-vivos) trust is a document written while you are alive where you transfer your assets, including retirement accounts, insurance policies, and other property, to a trust for your benefit while you are alive and upon your death, those assets transfer immediately to designated beneficiaries by an individual known as the “successor trustee.” On the other hand, a Will is a document where your assets are distributed by an executor to your named beneficiaries in a process known as probate. A will takes 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 the property for your and your family’s benefit during your lifetime. Almost 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 endeavours. 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.
As mentioned, a living trust allows flexibility in managing your affairs. However, this flexibility is particularly important if you become ill or incapacitated. If you a have a will without a durable power of attorney (a document which allows another individual to make decisions on your behalf, including medical decisions and property dispositions) then there is no one that can immediately take over. This can 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. Furthermore, you can name a successor trustee(s) in your living trust, giving you peace of mind and full control of who may make decisions for you in the event of illness or incapacitation.
Another benefit of a living trust is privacy. In the case of a will, upon your death, the will be 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. However, a living will allows 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 trusts assets.
A third benefit is if there is property in another state, this property can transfer 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.
What should you do?
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.
ABOUT THE AUTHOR: The Law Firm of Steven F. Bliss Esq.
The Law Firm of Steven F. Bliss, Esq. has been decidedly focused on Estate Planning which entails Probate, living trust as well as trust administration. Furthermore, if you desire to avoid probate for your family, then I urge you to consider developing a solid estate plan with an appropriate trust.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.