Estate planning is something many people have heard about, but may not be entirely familiar with. You may have heard about “probate” or a “living trust” or a “last will and testament” but do not know exactly what all of these things mean. Unfortunately, there’s no Adulting 101 course that we are all required to take! One option that many people use when creating an estate plan is a living rust. Let’s look at what that entails.
- A living trust, also known as a revocable trust, is a legal document that lets you transfer your assets into these legal entity that you create and are in control of for your whole life unless and until you either die or become incapacitated.
- You are the creator of the Trust also known as the Settlor or Trustor. Only the Settlor and Trustor can change a revocable living trust.
- You can name yourself as the “Trustee” and maintain control over your assets while you are alive.
- You can also name a successor trustee who will manage your assets once you pass away or become incapacitated.
The main benefit of a living trust is that it can help you avoid probate, which is the court-supervised process of distributing your assets after you die OR managing your assets while you are incapacitated (e.g., Brittany Spears had a court appointed conservator over her assets). Probate can be a lengthy and costly process, and it can tie up your assets for months or even years.
Another benefit of a living trust is that it can help ensure that your wishes are carried out in the event that you become incapacitated. If you become unable to manage your own affairs, your successor trustee can step in and manage the trust for your benefit.
For example, if you have a minor child receiving money from your trust, e.g, from a life insurance policy, perhaps you might stipulate that their money is managed by someone you trust for that child’s benefit and for their health, education and support. Then you could say, once your child reaches the age of 25, they could have access to whatever is left. You can pick any age you want.
When you set up a living trust, your assets are transferred into the trust, which means they are no longer part of your probate estate. Instead, they are held in the trust for the benefit of your beneficiaries. When you die, your successor trustee can distribute your assets to your beneficiaries without having to go through probate. Note, that you don’t even have to have assets today. For example, if you have a minor child inheriting money from a life insurance policy, you can name your Living Trust as the beneficiary.
If one of your beneficiaries receives public assistance for a disability or health insurance, setting up a trust to own their assets after you die may help them stay eligible for benefits, since there are usually very strict asset limits to maintain eligibility.
It’s important to note that setting up a living trust requires some upfront work and ongoing maintenance.
- You’ll need to transfer your assets into the trust, which can be a time-consuming process.
- You’ll also need to update your trust regularly to ensure that it reflects your current wishes and circumstances.
It is extremely important to work with someone who knows how to get your assets into your trust. An unfunded trust does not avoid probate. Our law firm has done MANY, MANY, MANY probates because a person died with an unfunded trust.
It is very important to work with an experienced estate planning attorney who can guide you through the process and help ensure that your wishes are properly documented and legally enforceable.
In addition, a living trust may not be the right choice for everyone. If you have a relatively small estate or if you’re comfortable with your assets going through probate, a living trust may not be necessary.
In summary, a living trust is a legal document that allows you to transfer your assets into a trust during your lifetime. The primary benefit of a living trust is that it can help you avoid probate, which can be a lengthy and costly process. If you’re considering setting up a living trust, be sure to consult with an experienced estate planning attorney to help ensure that your wishes are properly documented and legally enforceable.
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