What a Living Trust is
A Living Trust is a legal document created during a person’s lifetime that defines how his/her assets will be distributed after the person’s death. It is an effective way to pass on property avoiding the costly and time-consuming probate. A Living Trust enables the Successor Trustee (executor in case of a will) to manage a person’s assets in the event of his/her incapacity or death. The Successor Trustee can be an individual(s), a bank or a Trust company.
Types of Living trust
There are three types of Living Trust: revocable, irrevocable and joint.
With a Revocable Living Trust, the trust settlor can assign himself or herself as the trustee and control the assets within the trust. This means that you gain control of all assets as the trustee of your Revocable Living Trust. You can also change the trust any time. The assets in the Revocable Living Trust, directly pass to beneficiaries avoiding the probate upon your death. Yet, Revocable Living Trusts will not minimize your estate taxes.
Irrevocable Living Trust enables you to distribute your assets permanently during your lifetime. Irrevocable Living Trust cannot be changed or annulled. After this you will lose all the control over the assets, therefore, you will be freed from paying estate taxes. This is probably the biggest potential benefit of an irrevocable trust.
A Joint Living Trust is a Living Trust with another person. For instance, spouses can decide to create one Joint Living Trust instead of two separate Living Trusts. A Joint Living Trust offers advantages like increased privacy, reduced probate costs, and easier asset management. Yet, unlike the situation where spouses each have their own Wills or separate Living Trusts, a Joint Living Trust offers less flexibility to the surviving spouse after the death of the first spouse to change the terms of the trust in response to changing circumstances.
Having a Living Trust Means:
Avoiding the complexity of probate
In many states without a Living Trust, your property will be a subject of probate which is a long and tough process. Going through probate process can take you months to a year while having a Living Trust will help you to distribute your assets to your heirs much faster. Besides, aside from paying your debts, your heirs will not be concerned about paying probate and court costs.
Saving on estate taxes
A Living Trust can also substantially reduce federal estate taxes. In case of irrevocable living trust you lose your control over your assets, thus you get completely exempt from taxes. While joint Living Trusts are designed for married couples and are effective in reducing or avoiding estate taxes.
Protecting your information
Having a Living trust means keeping your property information private. A Living Trust is not a public record and no one ever will see what you left to your beneficiaries. It is a private document between the parties involved. While a will is a public record and anyone can have an access to it.
Being able to deal with incapacitation
In case you become ill or incapacitated, the person you have chosen as successor trustee can manage your affairs. The good point is that no court intervention is needed. Moreover, if a Living Trust is revocable, you can retain control of your assets by restoring your trust once recovered.
Planning your future and making sure your assets will be distributed according to your wish is an important and urgent thing to do. A Living Trust will enable you to pass on your property to the ones you trust. However, you can not do it yourself as it requires certain knowledge and skills. The estate planning attorneys at the Margarian Law Firm have the necessary experience in estate planning and knowledge of the law to assist you in estate planning and managing your Living Trust.