The Benefits of a Living Trust
Posted by cskadmin on November 28, 2012
When considering your estate planning needs, it can be beneficial to have the tools necessary to distribute your assets in the way you want. While a will is necessary for most people, there are also advantages to a living trust.
When considering your estate planning needs, it can be beneficial to have the tools necessary to distribute your assets in the way you want. While a will is necessary for most people, there are also advantages to a living trust.
A living trust is a written legal document that partially substitutes for a will. The trust is administered for your benefit during your lifetime, and then transfers to your beneficiaries when you die. It can help ensure that your assets will be managed according to your wishes — even if you become unable to manage them yourself.
Almost any type of asset can be placed in a trust: savings accounts, stocks, bonds, real estate, life insurance, business interests, and personal property. To fund a trust, you simply change the name or title on your assets to the name of the trust.
When establishing a living trust, most people name themselves as the trustee in charge of managing the trust’s assets. You can also name a successor trustee — either a person or an institution — who will manage the trust’s assets if you ever become unable or unwilling to do so yourself. You can amend or revoke the trust at any time.
At your death, the trustee — similar to the executor of a will — would then gather your assets; pay any debts, claims and taxes; and distribute your assets according to your instructions. Unlike a will, however, this can all be done without court supervision or approval. And because the trust would not be under the direct management of the probate court, your assets and their value (as well as your beneficiaries’ identities) would not become a public record.
Since a living trust can hold both separate and community property, it may be a convenient estate planning vehicle for spouses and registered domestic partners to plan for the management and ultimate distribution of their assets in one document. A living trust does not exempt the assets from estate taxes or state inheritance taxes.
Living trusts are most appropriate for those with substantial assets or complex estates. In general, financial planners frequently recommend them for individuals or couples with an estate of $1 million or more. Estates of this size typically are subjected to probate in the deceased’s state of residence, which can cost anywhere between 2% and 4% of the estate’s value in court and legal fees and can take months to settle.
Do You Still Need a Will?
A will is an essential backup device for property that you don’t transfer to yourself as trustee. If you don’t have a will, any property that isn’t transferred by your living trust or other probate-avoidance device will go to your closest relatives in an order determined by state law. These laws may not distribute your property in the way you would have chosen. Also, if you have minor children, you need a will to establish guardianship.
Source/Disclaimer:
This communication is not intended to be legal or tax advice and should not be treated as such. Each individual’s situation is different. You should contact your legal or tax professional to discuss your personal situation.
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