A living trust, a revocable living trust, specifically, is legal documentation that puts your assets—investments, financial institutional accounts, real estate, motor vehicles and invaluable personal property—in trust for your welfare throughout your lifetime, and states where you would like these items to go when you pass away. Since it is revocable you can terminate or modify it at any time while you’re alive. You designate yourself as trustee (spouses may be co-trustees) and stay in complete control of your assets, moving them to and fro in the trust as you desire. A difference from a will is that you also designate a ‘successor trustee’ that will be represent you upon your passing and transferring your assets immediately to your beneficiaries in accordance with your wishes. Additionally, if you come to be incapacitated, your successor trustee would represent you, managing financial matters and even controlling property or business assets on your behalf. It’s all simply detailed and, contrary to a will, can be handled devoid of any court involvement.
2 main benefits—bypassing probate and guaranteeing privacy
This ability to avoid the courts is one of the big benefits of living trusts. A will needs to go through probate, which is the comprehensive but lengthy and meticulous legal process used to evaluate your estate, settlement of any debts, taxes paid and transfer assets to your successors. Any assets that are registered in just the name of the deceased have to go through probate. The costs of probate and timelines vary state to state, but typically, the larger the estate, the cost increases (anywhere from 5-10% of the value of the assets) and the longer the time (somewhere from 9 months to 2 years) until the assets are allocated. Another huge advantage of living trusts is privacy. A will is a document in the public domain, open for all to investigate and possibly challenge. Probate on it own is open to public viewing, so anyone could see the specifics of your estate. Conversely, a living trust is private, usually harder to challenge, and by passes the public probate process entirely. For your information, there are other ways of avoiding probate. For instance, anything that has a named beneficiary like retirement accounts or insurance policies goes straightforward to the beneficiary and would not be contained in a trust. (Just be sure your designation of beneficiaries is up-to-date) You can also set up POD accounts for financial institution accounts and specific government securities, and title property as joint residence or communal property.
A potential drawback— it’s cost
There are online tools that allow you to devise your own living trust, but strongly suggest utilizing an estate planning attorney. It’s a good idea to have someone that understands the particulars of the process in addition to the subtleties of your own situation to help you plan properly and stay away possible pitfalls. Attorneys’ fees will vary subject to the convolution of your financial situation. Nevertheless, usually an attorney will set up a basic trust for a flat-fee. Plan on beginning at about $1,000 and increasing from there. If your employer provides a legal plan as a benefit, you might want to investigate is a living trust is covered or obtainable at a discount rate. To decrease attorney time and costs, consider in advance about the assets you’ll want to put in trust, where you want the assets to go when you die, and who you want to designate as the successor trustee.
An important stipulation—you must fund it
To acquire the benefits of a trust, you must place your assets in it. Meaning retitling your property and accounts in the trusts name. Your attorney might be able to take care of some of this on your behalf, but when not, you need to make sure to do this yourself. You ought to also devise a “pour over” will. This basically declares that any assets that aren’t already in the trust need to be included at time of your passing.
An intelligent solution for a lot
A living trust is not completely necessary for all of us but it will definitely help if, for example, you have a large amount of assets, you are the owner of property in different states, or you have an extended family where things might get more complex. Additionally, it isn’t a question of the amount of capital or property you have. It is what will give you the greatest guarantee that your assets will be allocated in accordance with your wishes, and that the process will be as streamlined and effortless as possible for your successors.
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