For many people, estate planning means drafting a last will and testament. Although almost every person should have a will, there are other documents that may also be appropriate to include in an estate plan.
For example, if you have significant assets or a complicated estate, a living trust may offer you more benefits than a will can offer. However, people generally know less about living trusts than they know about wills, which can sometimes make them shy away from implementing living trusts in their estate plans.
What would I do with a living trust?
A living trust is a type of trust you make during your lifetime. If you create a living trust, you are called the grantor. Once the trust is created, you can transfer ownership of your assets to the trust. This is sometimes referred to as funding the trust.
Then, the trustee manages the assets in the trust on behalf of the beneficiaries. If your living trust is revocable, you may name yourself as the trustee and manage the assets in the trust in much the same way you managed them before they were put into the trust. You may also move assets into and out of the trust as you see fit.
If your living trust is irrevocable, you may need to select someone else to serve as the trustee. You will not be able to alter this type of trust once it has been created, but irrevocable living trusts can protect assets from creditors or judgments. They can also prevent property from counting against you if you apply for certain government benefits later in life.
Living trusts do not go through probate
One of the main benefits of a living trust is the ability to avoid probate, which can be time-consuming and expensive. Probate is also a part of public record, so by avoiding it, you can keep the details of your estate private.
Once you pass away, the trustee or successor trustee will distribute the assets to the beneficiaries according to your wishes. In some cases, a beneficiary may receive his or her entire inheritance shortly after the grantor's passing. However, if you prefer, a beneficiary may receive his or her inheritance in small amounts over a longer period of time.
Ultimately, it is a personal decision to include a living trust in your estate plan or not. However, when you have an understanding of how living trusts work and what they offer, you will be better equipped to make the best decision for your situation.