While a living trust is a commonly used estate planning tool not everyone knows what it is and how it works. Creating a living trust has become a way to avoid the time and expense of probate, but there are other important benefits of which you should be aware. If you are considering including a living trust in your estate plan, you should know more about living trust benefits.
A living trust and how it works
A “living trust” is basically a special kind of trust that goes into effect during your lifetime, instead of only being established by your will when you die. As with many other types of trusts, the assets you transfer to a living trust will eventually be managed by a trustee until distributed to your beneficiaries. The trust document provides all of your instructions. However, what makes a living trust special is the fact that you can name yourself as trustee during your lifetime while naming a successor trustee to take over after your death.
A living trust and a last will and testament are not the same
Although a last will and testament and a living trust both provide a means to distribute your estate after your death, they do not operate the same way. First, a will only becomes effective after your death. A living trust, on the other hand, becomes effective during your lifetime, by holding your assets in a trust account for your benefit while you are still living. After your death, the living trust still controls how your remaining assets are distributed.
Living trust benefits include avoiding probate
Possibly the most widely recognized benefit of a living trust is the ability to avoid probate court proceedings. If you only have a will, the property in your estate must be probated in order for that property to be ultimately distributed to your heirs and beneficiaries. The same is true if you do not have a will. Your estate must still go through probate proceedings so the court can determine which heirs will receive your property. Alternatively, one of the best living trust benefits is the ability to avoid the probate process, meaning your heirs can receive their inheritances faster with your estate incurring fewer expenses.
A living trust is less likely to be challenged in court
Another one of the many living trust benefits is the fact that they are less likely to be disputed in court. If a potential heir challenges or contests your will, that can cost your estate a substantial amount in court and legal fees. However, with a living trust, the potential for legal disputes is drastically reduced. One reason is that living trusts are considered legally binding agreements between you and your trustee. The specific instructions provided in the trust document are difficult to dispute.
A living trust provides more privacy than a will
If keeping the nature of your assets private is important, then a living trust is a good option. The terms of your last will and testament will become a part of the public record, as probate proceedings are public. On the other hand, the provisions of a living trust are not open to the public. Therefore, another example of living trust benefits is that your assets and how you intend to distribute them remain private.
A living trust appoints someone to manage trust assets if you are incapacitated
With a living trust, you can appoint a successor trustee who will automatically assume management of the trust property if you ever become incapacitated. However, with a will you would also need to have a durable power of attorney so that someone can have the necessary authority to manage your affairs.
The terms of a living trust can be modified
Another one of the important living trust benefits is the fact that they are revocable trusts, which means you can modify their terms at any time while you are still alive. In fact, it is important to review the provisions in your trust agreement occasionally in order to make necessary changes as your life circumstances change. Your ability to amend or revoke your living trust is unlimited while you are still living.
Download our FREE estate planning worksheet today! 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.
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