A living trust is one of the most helpful estate planning tools. Many wills & estate attorneys recommend creating one when planning your estate, as it gives you control in both life and death. The best part of a living trust is it helps your heirs avoid lengthy probate battles and even estate taxes. This means that the heirs you choose in life get to take everything you’d like to leave them.
To put it most simply, a living trust puts all your assets such as investments, accounts, real estate, vehicles, and valuables in a trust while you’re still living. Because you’re still alive during this time, it can be changed and altered easily, either by your trustees. You can name multiple people as a trustee, or put certain conditions on the trust. You might want a living trust if you:
- Have minor beneficiaries
- Are single with no apparent beneficiaries
- Are recently married
- In a second marriage or older relationship
- Want your estate plan private
- Have real estate outside your state
- Want to prepare for if you’re incapacitated
Also Read: What Is Probate And How To Avoid It
Revocable VS Irrevocable Trusts
Living trusts are also referred to as revocable trusts. This means you can revoke or amend the trust if you so choose. Irrevocable trusts cannot be changed once they have been signed. Although this may offer more security, especially in the event you’re unable to change or alter your trust, it also means you cannot make any changes. Many trusts start out as revocable.
For instance, let’s say you write your initial trust at 35 years old and make your wife a co-trustee. If you separate from your wife or you have more kids, you’ll want your trust to reflect these changes in your life. The biggest benefit of a living trust is that it can easily be changed during your lifetime.
Benefits of Having a Living Trusts
Aside from being able to change the terms and conditions of your trust easily while you’re still alive, living trusts have many other benefits. Here are just a few that might just change your mind about having one.
Reduce Estate Taxes
With a living trust, heirs and trustees can avoid paying a lot of taxes on the estate assets. This also means your heirs get to keep as many assets as possible.
Also Read: Deductible Funeral Expense \ How Death Affects Taxes
Help Minor Beneficiaries
You can make it so part of the trust states that minors will receive their inheritance when they’re mature enough. Some trust holders will have the trust be released in increments of the heir’s age. This way, the money is staggered and they’ll still receive funds when they need it most. For instance, you could have it so that a certain amount of the trust is allocated to a minor’s college fund or for when they want to buy a house.
Stops Heirs From Making Mistakes
Kids can make some pretty big mistakes, especially when they have a lot of money. Many children who do inherit money from a loved one can make poor choices with drug, alcohol, or lifestyle choices. This can be especially true if the heir is still grieving.
In contrast to this, if you feel your heir is responsible enough to make their own decisions while you’re still alive, you can change the trust so they will have full access to all their inheritance. This may also change if you have older children with different maturity levels. You may prefer that one receive their inheritance in installments while the other gets full access and control of distribution.
For more information on dependents and what options you have when creating your estate, check out our blog below.
Also Read: Conservatorship Vs Guardianship FAQ
Ensure The Right People Get Your Assets
A lot can change in your family, especially within the years after you’re gone. People in your family can get married, divorced, or inherit stepchildren. If you want to ensure that your assets stay within your immediate family, a living trust can help with that.
Probate legally verifies all the wishes of the deceased. Heirs often have to go through probate court in order to confirm the last will and testament. In addition to the lengthy court battle, others during this time have the opportunity to claim assets if they have legal justification. Any legal expenses during this time will come out of the will. A living trust can help heirs avoid this, and ensures they get almost everything that was left for them.
Also Read: What Is Probate And How To Avoid It
Keeps Matters Private
If the will is probated, it becomes a public record. This means that there’s more opportunity for others to claim assets from your will. Living trusts are private documents. So even if your heirs do have to take any part of the will to court, it will not be a public record.
Ensures Assets Are Protected While You’re Alive
If you end up incapacitated while you’re still living, a successor trustee has the ability to take control over the will. This is especially important if you do not have any immediate or obvious heirs like children. The trust ensures that if you can no longer make decisions, then a trusted loved one can fulfill all your wishes.
How Much Is A Living Trust VS A Will?
Living trusts are more expensive than just a will. This is because it has to be actively managed by your estate attorney if there are changes that need to be made. Living trusts must also have the assets placed into the trust before they’re accounted for.
Depending on the value of all your assets, and how much your estate attorney charges, the amount you can pay for a living trust varies. You can always call an estate attorney if you’d like to find an estimate on the cost of a living trust.
Also Read: Will & Estate Planning In 8 Steps