Why are living trusts important?
What Are Living Trusts?
A living trust is a legal instrument that enables you to control and protect your assets after you have passed away. What does this mean for you? What are the main benefits and advantages of using a living trust?
Living trusts are one of the best ways to pass on your assets and protect them from creditors. Living trusts are irrevocable, meaning that you can't get a court order to stop your spouse or children from accessing your assets. They also provide peace of mind during your final years, as you don't have to worry about whether or not you made the best financial decisions. Because they're irrevocable, they protect your estate and make sure it is distributed according to your wishes – but only if you create a living trust properly.
Living trusts are irrevocable documents that you create by filling out forms with your lawyer or bank. The purpose of a living trust is to hold assets for you and your family after you die. Living trusts protect your property from creditors, ensure that your beneficiaries receive their inheritance without probate court involvement, and help avoid family disputes about who should receive what at death by giving power over those assets to an individual person or group of people called trustees.
Many individuals believe that estate planning is solely for the wealthy. That's not accurate. A living trust is necessary for everyone who owns a house, apartment, or mobile home. It provides you peace of mind and leaves a serene legacy for your loved ones to have a will or, better yet, a living trust in place.
Types of Living Trusts
There are two main types of living trusts: revocable and irrevocable.
Here are the differences between them:
1. Revocable living trust
The most common and adaptable kind of living trust you can create is a revocable one. Usually, when you hear the phrase "living trust," this is what is meant. A revocable living trust's grantor has the right to modify or revoke the trust at any moment prior to passing away. You can increase the trust's asset holdings, add or remove beneficiaries, modify its terms, and sell off trust assets.
Your trust will become irrevocable after your passing, making it impossible to amend or cancel. The assets of your trust will thereafter be distributed in accordance with the directions in the Declaration of Trust by your successor trustee.
2. Irrevocable living trust
An irrevocable trust is one that cannot be changed or revoked. Similar to a revocable trust, you transfer ownership of your assets to this kind of living trust. However, you won't have complete discretion to alter beneficiaries, revise instructions, or dispose of property once your assets have been transferred to the trust. A judge's ruling or a signed agreement by the trustee and all of the trust's beneficiaries are often required for changes to an irrevocable trust's provisions.
Revocable trusts are more typical than irrevocable ones. Wealthy people might use them to evade taxes and creditors. Because they really remove your assets from your taxable estate, irrevocable trusts, unlike revocable trusts, may help you avoid some estate taxes.
Who needs a living trust?
Depends, really. However, as a rule of thumb, iIf you own a home, you need a living trust! If you have assets over $25,000 you should have a living trust!
A living trust is essential, without one your loved ones can end up in probate court. A fully funded living trust helps transfers assets smoothly to your loved ones outside the court system. Probate court is expensive, time consuming, stressful, and often causes division among family members. A living trust is the best way to hold and transfer assets.
How to get started with your living trust?
Before you get started, there are several things you should decide:
Whether you wish to assemble a pour-over will and a living trust
Who you desire to serve as your successor trustee (and if they should be the same person as the executor of your will)
Which resources do you wish to add to your trust?
Whom do you want to inherit your assets once you pass away?
You must sign and execute your living trust documents after completing them online.
You might need to have your paperwork notarized depending on where you live.
Your property will then need to be officially transferred to the trust. If your home is included in the trust, for instance, you will need to modify the deed to reflect the trustee's ownership of the property. Additionally, if you continue to accumulate more property, keep in mind that you should either do so in your capacity as the trust's trustee (rather than in your personal capacity) or that you should thereafter transfer the asset to the trust by a deed or other legal means.
Benefits of Living Trust
A living trust is a legal document that can control the distribution of your assets after you die. When you set up a living trust, you designate who will inherit your assets and how those assets will be distributed.
A fully funded living trust allows you to make distributions of your assets easily, without the need for court intervention or additional paperwork. It also helps ensure that your loved ones receive what they are entitled to under state law.
They help put your estate in order by preparing for and planning for your death.
They reduce probate costs by reducing the number of people who have to sign documents regarding your estate.
They keep family members from fighting over who gets what from your estate after you pass away.
They allow you to name a guardian for any children you may have, which is helpful if there are no other relatives available to serve as guardians.
Living trusts are essential, without one your loved ones can end up in probate court. A fully funded living trust helps transfers assets smoothly to your loved ones outside the court system. Probate court is expensive, time consuming, stressful, and often causes division among family members. A living trust is the best way to hold and transfer assets.