Do you own assets that you wish to eventually pass down to your heirs? Are you looking for the right approach to hand over these assets?
You should consider the benefits of a living trust.
This is a legal structure that holds your assets in a trust during your life. You have control over this trust and can make changes as you please.
Upon your death, these assets get transferred to your heirs. You choose your heirs and your distribution plan. It’s one of the easiest legal structures to start and manage your assets.
Here’s why you need to consider a living trust.
One of the main reasons why someone chooses a living trust is to avoid probate.
Probate refers to the process of distributing the deceased person’s assets under court supervision. This is one of the most stressful and inefficient ways of distributing assets.
It can take months and cost exorbitant legal fees. It can also lead to your heirs not getting what you wish to bequeath to them.
A living trust puts more responsibility and freedom in your hands. It’s a far more efficient process than having to go through the court system.
Another great reason for considering a living trust is because it’s a private transaction. The details of the living trust remain between you, your heirs, and your attorney.
A living trust is not a public record. As such, a private citizen cannot research your assets and who your heirs are.
The alternative to a living trust is a will which is always a public record.
When someone dies, their estate inherits their assets, and often, inherits their debts. There’s always the possibility that your assets will get contested.
Your estate might have to enter legal battles which will become costly. The asset distribution might not go the way you expect.
A living trust might cost more upfront than creating a Last Will and Testament. It’s a more complex document and requires more action on your part.
Any time you wish to make changes, you’ll likely have to spend more to engage your attorney’s services.
Nevertheless, the money you pay now avoids future financial complications with your estate. It’s best to make the investment now than pay dearly at a later stage.
It Helps in Emergency Situations
What happens if you were injured or incapacitated? Who would handle your assets then?
With a living trust, you can appoint a successor trustee. They will manage your living trust without needing the supervision of a court.
A living trust is also revocable. If a successor trustee decides against your will, you can always alter the living trust. At any given time, you can also cancel the living trust.
It Provides Certainty
One of the reasons why we deal with such legal structures is to find certainty. Living trusts are one of the few legal structures that provide great certainty for asset holders and their heirs.
You can have the certainty that your assets will get protected from bad actors. You can make sure that you clearly define who your heirs are. You’ll also choose the specific assets and your distribution plan in your living trust.
Because the living trust is revocable, you also have the certainty that you can make changes when needed. If you aren’t happy with your living trust, you can cancel it and start over. This certainty is what attracts many people to manage their estates with living trusts.
It also provides certainty for your heirs, who know what they’ll receive. It takes away the potential stress of having to battle in a court over your estate.
Assets Remain in the Family
If you pass on your assets to your children, you want to make sure they get to keep them.
Let’s suppose your child marries someone and then gets a divorce. In many situations, the spouse might win over the assets in a court battle.
However, a living trust automatically negates this situation. With a living trust, you can ensure that assets remain with biological children.
It can prevent the transfer of these assets to non-biological family members or any other outsider.
It’s Great for Minors
Do you have children who are currently minors? You want to make sure that assets are given to them when they are adults.
You can keep these assets in a living trust. Your children can keep an eye on these assets but cannot access them until they become adults. Once they become adults, you can transfer the assets to them.
A “trust fund” is a perfect example of a living trust. This refers to monies that you want to give to your children when they become responsible.
What’s great about a living trust, is that you can distribute it to your liking. For example, let’s suppose you wish to bequeath $100K to your child. You might give $10K when they turn 18.
Then as the child gets older and proves financial responsibility, you will distribute the remainder of the funds to them as you please.
You Might Reduce Estate Taxes
The laws vary based on your area, but living trusts are often a great way to reduce estate taxes. If you speak to your attorney, you can figure out how to organize your living trust to reduce estate taxes upon your death.
This takes away the burden from your estate and your heirs. This is another major reason why people choose living trusts.
With a Last Will and Testament, an estate tax is a major hindrance that your heirs will have to bear.
Those Are the Benefits of a Living Trust
Now that you know the benefits of a living trust, you should consider preparing one for your assets. While it can be a bit complex, the freedom and peace of mind you’ll get makes it worth every penny!
Start by preparing a list of your assets and then consult with an attorney. Make sure you discuss your assets with your heirs. Let them know beforehand what you wish to bequeath to them.
Once you’ve planned your blueprint with them, you can prepare your living trust.
You can also find other great legal tips on our website!