Living Trusts & Estate Planning
A Living trust is a legal arrangement, used by estate planning professionals that allows assets to be held and managed by a third party. This third party in a trust is known as a Trustee. The Trustee is the person or group of people responsible for ensuring that an estate is handled in the manner specified in the trust documents. A living trust lets you decide how your assets are managed and distributed. A living trust holds (owns) the property you put into the trust. Unless specifically stated in the language of the living trust, you are permitted to control the trust assets as the trustee while you are living. Upon your death, the living trust becomes irrevocable and the assets in your trust will be distributed to the beneficiaries that you have designated.
The person who creates the living trust, is known as a grantor or settlor. The successor trustee is the person or institution who takes over the management of a living trust when the original trustee (typically you) has passed or become incapacitated. The beneficiaries of the trust are the people named in the living trust who will receive the assets held by the trust once you have passed.
Language defining the rules of the trust, such as the name of a successor trustee and information on how the assets of the trust are to be distributed upon your passing are all recorded in the trust documents. The living trust is funded by transferring your personal assets to it. Once the assets are transferred, the trust owns the assets. While the trust is revocable and you are designated as the trustee, you may place assets into the trust or remove assets from it. Most types of assets can be placed into a living trust. Common examples of irrevocable trust assets include real estate, land, automobiles, business interests, stocks, bonds and bank accounts.
What are the benefits of a living trust?
A living trust may offer a person a variety of benefits. You will want to speak with an attorney who specializes in estate planning to determine how you might be able to best utilize a living trust, but here are some examples of the potential benefits:
- A living trust can offer asset protect
- You can include instructions for distributing assets to loved ones
- A living trust provides greater control and flexibility to distribute your assets when compared to a will
- You can name charitable organizations as beneficiaries
- You can specify whether or not funds held in the trust should be used for your long term care
- A living trust allows you to avoid probate
- The details of your trust are kept private, unlike a will which is made public during the probate process
There are a variety of types of trusts with different intended purposes. The most common reason people choose to use a trust for estate panning is to make sure their assets are distributed how they wish and to avoid probate. Here are some of the most common types of trusts:
- Revocable Living Trust – A living trust is a legal arrangement established by a grantor during their lifetime to protect their assets and direct their distribution after the grantor’s death.
- Irrevocable Living Trust – An irrevocable trust is a trust where the trustor nor anyone else is allowed to change the document. Often a revocable trust will become irrevocable when an even occurs, such as the passing of the trustor.
- Special Needs Trust – A special needs trust allows a person with special needs to be awarded their inheritance without impacting their Social Security benefits.
- Asset Protection Trust – An Asset Protection Trust is a trust that is designed to protect a trustor’s assets from creditor claims.
- Charitable Trust – A charitable trusts is a trust designed to carry out the charitable interests of a trustor.
- Trust Fund – A trust fund is an estate planning tool that holds property or assets for a person or organization. Trust funds can hold a variety of assets including currency, real property, stocks, or a business interest.
A trust is just one way and one component used in estate planning. If you are trying to decide how to bets handle the distribution of your assets or how to prepare for the care of your children if you should pass, we encourage you to contact a lawyer for guidance. The information hosted on trust and estate matters is only meant to be a resource and to help you understand the basics of estate planning and trusts.
How do you create a living trust?
If you are interested in adding a living trust to your estate plan, our best advice is to seek the assistance of an experience trust & estate lawyer or estate planning attorney. A living trust can be a complex legal instrument. If you have a relatively simple estate, do not have the funds needed to hire an attorney or simply prefer to create one on your own; there are online services that can assist you in creating one for less money and in some situations at no cost.