The Learner’s Guide to Living Trust
We tend to think of the moments in life that are celebrated and plan our future based on those dreams. We don’t like to think of the fact that we can’t live forever. Although death or incapacitation halts one’s journey in life, family and relatives are often left to patch things up. That’s why it’s best to start your estate plan now.
A living trust is an excellent option when it comes to estate planning. Most people believe that living trusts are only for the wealthy. That is a common misconception because people with an average income can also benefit from a trust.
The question now is, what is living trust, and how does it work?
Living Trust Facts
A will and a living trust both consider your wishes pertaining to your estate, investments, property, and other assets. The significant difference is that a will is activated after death and enters probate.
What is a living trust? It is a legal document created by a grantor (you), in which your estate is placed in a trust to help you during your lifetime. Then it is transferred to the beneficiaries after your death by your trustee (heir/successor) who has the power to manage the estate.
Contrary to popular belief, estate planning is not only about death. It focuses on asset control even when you are alive.
How It Works
When you form a living trust with your attorney, you as the grantor will have to transfer the ownership of your assets to that trust by taking all your investment deeds and changing the names to the name of the trust.
As the grantor, you will then have to choose a successor or a trustee who will see that the instructions of the trust are carried out. You can choose a family member as a trustee or a professional trustee, usually from a financial institution.
You can leave a full inheritance to your beneficiaries from the trust. You can also establish conditions that the beneficiaries must meet before they receive their inheritance. For example, a son has to finish school before he gets his inheritance.
Types of Trusts
- Irrevocable trust
An irrevocable trust means that the terms of the trust cannot be changed and revoked once it has been formed. No asset in this trust can be accessed by creditors, in-laws, or any financial predator. If you want to keep your assets out of reach, this is the route for you.
- Revocable Trust
A revocable trust is more flexible than an irrevocable trust. It enables you to retain control even after transferring your assets to the trust. You can revoke or change the living trust at any time. But the moment you die, it becomes an irrevocable trust since you are the only one who can make the changes.
Benefits of Living Trusts
- Save Time and Money
When you have a will, your estate must go through probate. A living trust, on the other hand, does not go through probate, which can help you save substantial money.
In other words, you will distribute your assets to your beneficiaries much faster. This process is the fastest to complete the transfers.
- Ensure Privacy
A living trust is a private affair as opposed to a will. Upon your death, your estate will be transferred to the beneficiaries in private. A will is a public record, and the transactions will also be public.
You can make the life of your loved ones better by preparing well and planning ahead using a living trust. If you need an estate planning lawyer near you, contact Bazikyan Law Group, and we will help settle your concerns.