Living trusts are most commonly used to avoid probate, an often time-consuming and costly court proceeding. Without a trust or some other type of estate planning tool, your estate must go through the probate process before you property can be distributed to your heirs. But before you decide to create a living trust, you need to be aware of some of the pros and cons of a living trust. Living trust attorneys can explain all of your options, if you are seeking to avoid probate.
What exactly is a living trust?
A “living trust” is basically one type of trust that goes into effect while you are still alive, as opposed to only becoming effective after your death. As with all other kinds of trusts, the property that is transferred to the trust will be held and managed by the trustee you select, until it is time to transfer that property to your heirs. Typically, a living trust only covers particular property or assets, not the entire estate.
What are the advantages of a living trust?
The primary advantage to establishing a living trust is the ability to avoid probate. By creating a living trust, you can save significant time and money. You can also avoid many potential problems that often arise when the assets of an estate are distributed to heirs. There are also many tax advantages that can be gained from a living trust. Living trusts have the potential of reducing estate taxes. They are also much more private than the probate process, which is a matter of public record. So, if maintaining privacy is important for you, then living trust attorneys will often recommend this type of trust.
Do living trusts provide legal protection for assets?
Another big advantage of creating a living trust is that it comes with certain legal protections that other estate planning tools may not offer. Because a living trust is a legal document, it is enforceable by the court much like a contract. So, if there are any challenges to asset transfers, the court will enforce the terms of the trust document, as the best evidence of your intentions.
Are there any disadvantages to having a living trust?
As helpful as a living trust may be, it does have its disadvantages. One disadvantage is that having a living trust alone is usually not sufficient. Most people name themselves as the initial trustee of their own living trust. That way they can maintain control over their property during their lifetime. However, your successor trustee (who takes over after your death) may not have the power to manage any property that was not included in the living trust before your death. For that you would likely need for a power of attorney.
Can I change the terms of a living trust?
Not only can the terms of your living trust be changed, but it is actually recommended that you review those terms periodically to see what changes need to be made. As a general rule, you need to revise your living trust when there are significant changes in your family situation or your finances. For instance, the birth of a child or grandchild, a divorce, or the death of a beneficiary, are all reasons for reviewing your trust. You can always amend or revise your living trust as long as you still have the legal capacity to do so.
Who controls the proper I transfer to my living trust?
The great thing about a living trust is that you can designate anyone you choose as your trustee, including yourself. In fact, in most cases people name themselves trustee of their living trust in order to retain complete control of their assets. They can continue to buy and sell assets and remove them from the trust whenever they see fit. If you are married, you can also designate your spouse as the co-trustee. In order for the trust to continue to operate after your death, you need only designate a successor trust to take over upon your death.
Do I need an attorney to help create my living trust?
Although creating a living trust requires simply transferring the title or ownership of your assets to the trust, the language of the trust agreement needs to be properly drafted. For that reason, it is wise to seek legal advice. Living trust attorneys are skilled and experienced at creating this valuable estate planning tool and will make sure it is done correctly.
If you have questions regarding a living trust, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.