There are many reasons to have a Living Trust. Living trusts (also called revocable trusts and revocable living trusts) are a great estate planning option for people who own real estate or any significant investments, for those with more complicated family situations (including concerns of an heir who may challenge their estate plan), those with concerns of diminished capacity in later years, or those who simply value privacy over their affairs and want to ensure a smooth and efficient transfer of their assets when they are gone.
Forbes’ recent article, “Revocable Trusts And Why Should You Consider One,” explains that a living trust is created during your lifetime. On the other hand, a “testamentary trust” is created at death through a will (an inefficient option in my opinion). A living trust provides for the seamless transfer of assets upon your death, and names successor trustees to manage your property if you can’t. Best of all, this is all accomplished privately and with relatively little cost or delay.
Here are the top 3 reasons to consider a living trust, in detail:
1. A Living Trust Keeps Things Simple During Your Lifetime
A revocable trust is a flexible vehicle with few restrictions during your lifetime. You usually designate yourself as the trustee and maintain control over the trust’s assets. You can move assets into or out of the trust by re-titling them. This movement has no income or other tax consequences, nor is it a problem to distribute income or assets from the trust to fund your current lifestyle. In other words, it’s pretty much the same as it is now while you are alive and well.
2. A Living Trust is the Best Way to Handle Future Incapacity
Another reason for creating a revocable trust is the possibility of future diminished mental capacity, at which time it may be necessary for another person, like a spouse or child, to help with your financial affairs. A co-trustee can pay bills and otherwise control the trust’s assets. This can also give you financial privacy, by eliminating the need for a court-ordered conservatorship or guardianship.
3. A Living Trust is Best Way to Transfer Property at Death
When you pass away, a living trust has some considerable advantages over having your entire estate flow through probate (which is the court process typically required to transfer assets in your name if you die without a trust). The primary advantages of having your assets avoid probate are the ease and speed of asset transfers, and the lower administrative costs. Another advantage of a trust is privacy. A probated will is a public document that anyone can view, whereas a trust remains private and outside of the public domain.
Even with a revocable trust however, you still need a will (referred to as a “pour-over will”) as a safety net in case you fail to transfer certain assets to your trust during your lifetime (whether intentionally or by oversight). The pour-over will names your revocable trust as the beneficiary of your estate.
Talk to an experienced estate planning attorney about the best options for your situation to protect your estate and provide you with peace of mind that your family will receive what you intend for them to inherit, with the least possible uncertainty, cost, and stress.
Reference: Forbes (March 11, 2019) “Revocable Trusts And Why Should You Consider One”