What Is a Living Trust and Who Should Have One?
What exactly is a living trust and is it something that you need to have? Learn more about what this estate planning strategy.
If you have decided to put your affairs in order and are wondering if a trust is the right document for you, we're here to help. Read our blog article to understand a little bit more about a living trust.
What Is a Living Trust?
Similar to a will, a living trust is a legal document that lets you organize your assets and distribute them to beneficiaries in the event of your death. Depending of the type of the trust you can control and make changes to it while you're still alive.
For example, you can put your home into a trust, and the trust will own the house, but you will still be able to control it. You should include real property (like a house or land) and also bank account and investment accounts. An attorney will guide you how to deal with other assets like life insurance policies and retirement accounts.
Many people prefer a trust over a will because the beneficiaries don't want to go through probate after death. The Trust does need to be properly funded, read our blog about the importance of Trust Funding here.
Types of Trusts
If you decide to create a trust based estate plan, you must learn about the two types of trusts. Most people choose between a revocable or an irrevocable trust. We also sometimes will recommend a dynasty trust for some specific types of situations.
Revocable Living Trust
Because they offer more flexibility, revocable living trusts are the most popular trusts. With a revocable living trust, you have the option of making changes at any point. You can add or remove assets as well as change beneficiaries.
After your death, a revocable living trust will follow the guidelines of the trust and the first Trustee in line will step in.
As the name suggests, an irrevocable trust does not allow you to make changes once it's finalized. The process of an irrevocable trust is the same as a revocable trust.
You will still transfer the ownership of your assets into the trust, but you won't be able to make changes once you designate beneficiaries. For this reason, many people avoid irrevocable trusts.
The reason why some people might choose irrevocable trusts is that they sometimes are used for asset protection and they may work well for some specific situations. To read more about the advantages of an irrevocable trust read our blog about it (click here).
Should you have a Living Trust?
Whether or not you need a living trust depends on your circumstances. Many people decide to do a will. Only a consultation with an estate planning attorney will be able to define the best strategy.
You need to go through the process of transferring your property and assets into the trust and make changes throughout your life. If you're young, this could require maintaining the trust throughout your life. At the same time a Trust properly funded will avoid you probate and save you money and time.
If you're older, have a large estate, or want to avoid your family going through the probate process, a trust might be a better idea.
Are You Ready to Put Together Your Estate Planning Documents?
Now that you're more familiar with the concept of a living trust, you can decide if this is the right process for you.
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