Estate planning can be a confusing process. But as tedious as it may seem, having a poorly made will can lead to even bigger headaches for your loved ones.
If you are thinking about your estate plans, you may be wondering how to best protect and transfer your assets. One option that you may consider is a living trust.
What is a living trust?
A living trust is a legal agreement that can help you transfer your assets to your loved ones after you pass. You can transfer your assets to a trust and designate a person to be its trustee. After your death, the trustee is responsible for managing the trust’s assets in accordance to the trust document and in the best interest of the “beneficiaries”—the people entitled to the assets in the trust. A trust document allows you to designate beneficiaries and set rules for how they can receive your assets.
The main benefit of a living trust is that it allows assets in the trust to avoid the probate process. This makes it easier for you to transfer assets to the beneficiaries of your choice.
Different kinds of trusts
When you form a living trust, you will have to decide what kind you want to form. A living trust can be revocable or irrevocable.
Living revocable trust
A revocable trust allows you to name yourself as one of the trustees. You will also need to name a “successor trustee” who will become responsible for the trust after you pass. However, as a trustee, you may still make changes to the trust’s terms throughout your lifetime. This could include amending the trust rules, changing beneficiaries or dissolving the trust altogether. Once you pass away, your trust becomes irrevocable.
The main drawback to a living revocable trust is that your assets may still be liable for estate taxes if your estate exceeds the estate tax exemption at your time of death.
Living irrevocable trusts
When you set up an irrevocable trust, you give up a lot of control over your trust. Once you set up the trust agreement, you can’t modify its terms.
The benefit of an irrevocable trust is that any assets you place in the trust will not count towards your estate. This can provide protection from both estate taxes and creditors.
Setting up a trust
Setting up any trust is a complicated process with many considerations. But a trust’s complexity is also a benefit because it allows you to make detailed decisions about your estate. An experienced estate planning attorney can not only help you properly create a trust but can also advise you on how best to address your specific concerns.