As with all other available estate planning tools, living trust benefits are far-reaching. Living trusts provide effective probate avoidance from which every estate can benefit. Many clients would prefer to avoid the long, expensive probate process, which a living trust can accomplish, while allowing you, the grantor, to continue to control your property. Here are some of the most important living trust benefits.
First, what is a living trust?
A “living trust” is a complete will substitute that is effective during your lifetime as opposed to only becoming effective upon your death. Like other kinds of trusts, assets transferred to a living trust are held and managed by the trustee until the time comes to transfer the trust property to your heirs or beneficiaries.
Basic living trust benefits
Certainly, the biggest advantage to having a living trust is the ability to avoid probate, at least for the assets that are included in the trust. Living trusts also provide several tax advantages, such as lowering the likelihood of estate taxes. A living trust also provides more privacy than a will, which is required to go through the probate process, which in contrast is a very public process. Finally, a living trust provides more legal protection than a will.
Living trust benefits include legal protection
Another great benefit of using a living trust is that it offers legal protections that other estate planning tools typically do not. A living trust is a legal document similar to a contract, which is enforceable through the court system. Therefore, in the event there are any disputes or challenges to asset transfers or other transactions made pursuant to the trust terms, the court will step in and enforce those terms.
Changing the terms of your trust
Because a living trust is revocable, which means it can be changed, you have the ability to modify the terms of the trust at any point during your lifetime. In fact, it is strongly suggested that you review the terms of your trust periodically to determine if revisions are necessary. As a rule, your living trust should be reviewed anytime there are significant changes in your family or financial situation. Some common examples include the birth of a child or grandchild, marriage or divorce, and the death of a beneficiary, which are all life events that signal the possible need for revisions.
You can still control your living trust property
One great advantage of a living trust is that you can designate anyone you select as trustee, including yourself. In fact, in most cases, clients name themselves as trustee of their living trust so that they can maintain complete control of their property. You can continue to buy and sell assets, as well as eliminate assets from the trust whenever you decide. Also, if you are married you can have a joint trust and designate your spouse as co-trustee. However, in order for the trust to continue functioning after your death, you must designate a successor trustee to take over managing the trust upon your death.
One disadvantage of a living trust
In addition to all of its benefits, a living trust also has a few disadvantages. One thing to consider is that have a living trust by itself is not necessarily sufficient. With a living trust comes the need to appoint a successor trustee to take over the trust after your death. However, your chosen successor may not have the authority to manage any property that is not included in the living trust after your death. In order to provide for management of those other assets, you will likely need a power of attorney along with your living trust.
Living trusts also do not avoid estate taxes or creditors
Since living trusts are revocable, they simply cannot provide the benefit of reducing or eliminating estate tax liability. Since the terms of a living trust you can be changed at any time, the property essentially still belongs to you. As such, it remains a part of your estate. The same is true for shielding assets from creditors.
Discuss living trust benefits with an attorney
Before choosing a living trust you should consult with a living trust attorney to discuss the benefits and all of your options. Although creating a living trust requires transferring the title or ownership of your assets to the trust, the provisions of the trust agreement need to be drafted appropriately. For that reason, it is best for you to seek legal advice.
If you have questions regarding living trust benefits, or any other estate planning matters, contact Gersh Law Offices, P.S.C. for a complementary consultation either online or by calling us at (502) 423-7023.