What Is a Living Trust?
A living trust is an agreement in which a settlor (the person who creates the trust) appoints a trustee, to manages the assets within the trust, on behalf of the beneficiary or beneficiaries named in it. The beneficiary can be you or anyone else you name.
It’s called a “living trust” because it takes effect immediately after it is created, while you are still alive. Not to be confused with a testamentary trust, which is specified in a last will and testament and takes effect after death.
The living trust is often referred to as a revocable living trust because any of the terms and/or assets can be revoked. As your goals and objectives change, you can modify the terms of your living trust.
You can change beneficiaries or terminate the agreement entirely before or upon your death. You can even choose to have it continue after your death.
Most people serve as their own trustees for as long as they are able to do so. Once they no longer want the responsibility or are unable to continue managing the living trust, the named successor trustee can take over.
Now that you understand what a living trust is, let’s talk about why a living trust is a good idea. So here are 3 simple benefits of a living trust that will help put things in perspective for you.
1. A Living Trust Avoids Probate
Probate is the standard court-supervised process of distributing a deceased person’s assets. Any individually or jointly owned assets (with the exception of property owned jointly with rights of survivorship, or that have designated beneficiaries) are subject to probate.
For assets that cannot have a designated beneficiary (like a home) or do not have a joint owner, a living trust, allows those assets to pass outside of probate, and directly into the hands of the beneficiaries. A trustee of your choice will distribute the assets within the trust according to your instructions without court intervention.
The key is making sure the assets are re-titled into the name of the trust!
Avoiding Probate Saves Time
Since the assets owned by the trust do not have to go through probate, they can be distributed much faster. The probate process takes about nine months in Connecticut, but if the will is challenged, it may take even longer. A living will means shortening the time frame from months or years to just weeks.
Avoiding Probate Saves Money
Simply put, probate costs money! Between attorney fees, and creditors being paid out of the estate, you may be inheriting a lot less than you thought. Not to mention any interest you could be missing out on while waiting for your inheritance to be distributed.
Centralizes Out of State Property
One reason many of our clients choose a living trust for probate avoidance, is they own real property in another state (like Florida). Probate must be opened in each and every state where the decedent owned real property. Multiple probate administrations can be very costly. They can be avoided if the out-of-state property is placed into a trust.
2. A Living Trust Protects Your Privacy
One of the main differences between a Will and a Trust is that a will is a public record. Because it must be probated and the probate records are public. A living trust, on the other hand, is a private document. Once your will is probated, your will becomes public, along with other information such as the value of your assets, and even an inventory listing your assets.
If you don’t want any outside sources laying eyes on your asset distribution, a living trust may be the way to go.
3. Ease of Administration In Case of Incapacitation
If you become ill or incapacitated, the person you have chosen as your successor trustee can easily step in and manage your trust assets without the intervention of a probate court. This way you can avoid a court-appointed conservatorship.
And your power of attorney does not need to provide documentation to each and every financial institution.
Ready to Make a Living Trust?
The first step to putting together a solid estate plan that would include a living trust is by taking an inventory of your assets. Start thinking about who you want to inherit what, and of course who you will choose as your trustee and secondary trustee.
The next thing you are going to want to do is CALL US! In order to have a good estate plan that incorporates all your assets successfully, you need to talk to an estate planning attorney. Everyone’s financial situation is different.
Marketing Director & Probate Paralegal at RWC, LLC, Attorneys & Counselors at Law
Ukraine born and Israel / Miami, FL raised. University of Miami graduate in the Marketing field.
Mom to a girl, a boy, and a Siberian Husky.