What is a Living Trust? A living trust, also known as a revocable living trust is a legal arrangement that allows you (the grantor) to place your assets, such as property, bank accounts, investments, and personal belongings, into a trust during your lifetime. You act as the trustee, controlling and managing these assets as you would normally do. The trust document outlines how your assets should be managed and distributed during your life and after your death.
Why Create a Living Trust? There are several benefits to having a living trust:
Avoiding Probate: One significant advantage of a living trust is that it allows your assets to pass directly to your beneficiaries without going through the probate process, which can be time-consuming and expensive.
Privacy: Unlike a will, a living trust is private. Probate proceedings are a matter of public record, but a living trust allows your estate distribution to remain confidential.
Incapacity Planning: A living trust can provide for the management of your assets in case you become incapacitated, avoiding the need for a court-appointed conservatorship.
Control: You can specify how you want your assets to be managed and distributed to your beneficiaries after your death, giving you more control over your estate.
Creating a Living Trust:
Choose a Trustee: Select someone you trust to manage the trust after your passing or in case of your incapacity. It could be yourself, a family member, a friend, or a professional trustee.
List Your Assets: Create an inventory of all the assets you want to include in the trust, such as bank accounts, real estate, investments, and personal belongings.
Draft the Trust Document: Consult with an attorney to draft the living trust document. This legally binding document should specify how you want your assets to be managed during your lifetime, who your beneficiaries are, and how the assets should be distributed after your death.
Fund the Trust: Transfer ownership of your assets from your name to the trust's name. This process is called "funding" the trust. For example, you might need to retitle real estate in the trust's name or update the beneficiaries on financial accounts to the trust.
Manage the Trust: As the grantor and trustee, you will continue to manage and use your assets for as long as you're capable. If you become incapacitated, your chosen successor trustee will take over the management.
Distribution of Assets: After your passing, the successor trustee will distribute the assets according to the terms of the living trust without the need for probate.
Review Regularly: Keep in mind that life circumstances change, so it's essential to review and update your living trust whenever significant events occur, such as marriages, divorces, births, or deaths.
Remember, this explanation is just a basic overview. Consult with an estate planning attorney or a financial advisor for personalized advice and to ensure that a living trust is the right option for your particular situation.