What is a Living Trust?
A living trust an arrangement that is made to put someone in charge of a person’s property. A person can be their own trustee and continue to have complete control of any property that’s held in the trust. Or, a person can name someone else the trustee. When this happens, the trustee may also be called the beneficiary.
A living trust is created while you are still alive, as opposed to a trust that’s created upon your death. A living trust is similar to a will in that it clarifies what you want to happen to your dependents, heirs and assets. However, while a will only goes into effect once you’re deceased, a living trust can go into effect while you’re still alive, if you become incapacitated some way. For example, if you can’t handle your legal affairs or finances due to an injury or illness, your living trust will go into effect.
The Benefits of a Living Trust
There are several reasons why someone would create a living trust. It can lower estate taxes, or help manage a property for the long-term. It’s also ideal for people who have complex finances, such as a large amount of assets, or their own businesses. There are also sometimes complex personal issues that can make a living trust worthwhile, such as a large blended family. People who have property in several states may also want establish a living trust.
One perk to having a living trust is that it will avoid probate. Probate refers to the court proceedings that are necessary to distribute your assets when you have a will. When you don’t have to go through the probate process, your assets can be distributed much more quickly. Instead of your heirs waiting months, or even years, to receive your assets, they’ll get them within just a few weeks. Your trustee will pay any debts you owe, and then handle your assets the way you’ve specified in the living trust. Additionally, probate has associated court fees. When you have a living trust, more money can be distributed to your beneficiaries, because those fees don’t have to be paid.
Types of Living Trusts
There are two types of living trusts: a revocable living trust, and an irrevocable living trust. In a revocable living trust, assets are transferred into the trust. You’ll have control of the assets and act as the trustee. At any point, though, the trust can be changed or rescinded. When you pass away, the trust’s assets go straight to your named beneficiaries without having to go through probate. A revocable living trust will not minimize the amount of state taxes that have to be paid.
An irrevocable living trust lets you give away your assets while you’re still alive. This type of trust cannot be revoked – it’s completely permanent. Once you’ve given away your assets, you will no longer have any control of those assets. They won’t be considered to be part of your estate, which means you will no longer need to pay taxes on them.
Contacting a Roseville CA Estate Planning Attorney
While you can create a living trust on your own, it’s may be best to have it handled professionally by an estate planning attorney. Only a professional will have the knowledge and judgement necessary to create a worthwhile living trust. Also, simply writing a living trust won’t ensure that your assets will be distributed as you want them to be. Bond accounts, banks accounts and stocks have to be arranged so that your assets can go where you want them to go upon your death. It’s also common for people to develop an estate plan along with a living trust.
Thanks to our friends and contributors at Meyer & Yee, P.C. for their insight into living trusts.