A living trust is a common estate planning tool for many clients. Creating a living trust has become a way to avoid the time and expense of probate. If you are considering including a living trust as part of your estate plan, you should know more about the living trust benefits you can expect.
What is a living trust and how does it work?
A “living trust” is a type of trust that becomes effective during your lifetime, as opposed to being established by your will upon your death. As with other types of trusts, the assets you transfer to the trust will ultimately be managed by a trustee and later distributed to your beneficiaries pursuant to the instructions you include in your trust document. What makes a living trust different is the fact that you can name yourself as trustee during your lifetime, and then identify a successor trustee to take over after your death.
A trust is not the same as a will
A last will and testament and a living trust both provide a way to distribute your estate after your death, they do not operate in the same manner. Your will only takes effect after your death, distributing your remaining property to your designated heirs and beneficiaries. However, a living trust is effective during your lifetime, holding your assets in trust for your benefit while you are living. Then, when you pass away, the living trust will control how your remaining assets are distributed.
Living trust benefits include probate avoidance
Probably the most commonly known benefit of a living trust is the opportunity to avoid probate. If you have a will, your estate must be probated in order for your property to be distributed to your beneficiaries. If you do not have a will, your estate must still be probated so the court can determine which heirs will receive your property. However, one of the best benefits of a living trust is the ability to avoid the probate process, which means your heirs can receive their inheritances quicker with less cost to your estate.
Living trusts are less likely to be challenged in court
Living trusts, like trusts in general, are less likely to be disputed in court. A will contest can cost your estate a significant amount in court and legal fees. But with a living trust, the potential for a legal dispute is sharply reduced. Living trusts are legally binding agreements between you and your trustee that provide specific instructions which are difficult to dispute. Also, living trusts are valid in all fifty states regardless of where the trust was originally executed.
A living trust provides more privacy than a will
If retaining some semblance of privacy is important to you, then a living trust is the right choice. The terms of a will become public record because a will must go through public probate proceedings. Living trusts, on the other hand, are not made public so the nature of your assets and how you want them distributed remains private.
A durable power of attorney is not necessary if you have a living trust
Another one of the valuable living trust benefits is the fact that you won’t need the additional step of creating a durable power of attorney. Instead, the living trust can appoint a successor trustee who will automatically take over managing the trust property if you become incapacitated. With a will, conversely, you would also need a durable power of attorney to give someone the authority to manage your affairs. A living trust basically provides the same protection without the need for court intervention.
The terms of a living trust can be modified
Because living trusts are revocable trusts, you can modify its terms at any time while you are still living. In fact, you should review your trust agreement periodically in order to make necessary changes as your life circumstances are certain to change over time. Changes in your family circumstances such as the birth of a new child, marriage, divorce, usually signal the need for revisions. Your ability to amend or revoke your living trust is unlimited while you are alive.
If you have questions regarding living trust benefits, or any other estate planning matters, contact Gaughan & Connealy for a consultation either online or by calling us at (913) 262-2000.