A living trust is a legal document that makes it easier for you to pass assets to your loved ones after you die.
But do you need a living trust?
Well, that depends. The trust allows property to be transferred directly to your designated beneficiaries without needing to go through probate. If you want your loved ones to avoid probate, it’s a financial instrument that you should consider having.
Basics of the Living Trust
A living trust will be managed by a trustee, while you’re still living (that can be you).
You’ll name a successor trustee who will manage the trust, if you become incapacitated and distribute its assets after you pass away.
While the trust holds these assets, you’re still considered in possession of them while you’re alive (assuming you named yourself the trustee). Therefore, you can move assets in and out of the trust as you see fit. If you have a revocable trust, you can even cancel or change it at any time.
Creating a living trust can simplify the inheritance process for your family when you die. That’s because any property you own is subject to the probate process when you die. Probate can be a very lengthy process.
While waiting, your family may be unable to manage, use, or sell the property you left behind. Until probate is complete, your executor will be responsible for maintaining the property, including paying taxes, making repairs and paying the bills (like insurance).
A living trust is a beneficial financial product because it bypasses the probate courts. There are some types of assets that will pass on to your beneficiaries directly, and others will need to clear the probate courts before they can be disbursed to your beneficiaries. This probate process can take months or even years and can be both costly and complicated.
Controlling Your Assets From Beyond The Grave
Another benefit of a trust is that you keep control of your estate, even after you pass away. A living trust lets you set rules, timelines and stipulations for your estate. This may be something like keeping your children from getting a substantial sum of money in their early 20s. With a living trust, you can state instructions for your trustee as to when your kids receive that inheritance. For example, you may provide that they receive their inheritance in stages, like a third at 30, 35 and 40.
Finally, a trust is private. Unlike a will, your trust can be kept as private as you want. Once you pass away, and your will is filed with the probate court, it becomes public record. However, if you’d rather have your estate and your wishes kept out of the public eye, a trust can help you do so. Because a trust skips the probate process, it’s also much harder for someone to challenge your directives.