6 Reasons Why You Need a Living Trust
A living trust is an important tool that shouldn’t be overlooked in the estate planning process. It is a written legal document that is created by someone during their lifetime. This enforceable document is used to spell out their wishes regarding any property, financial assets, and beneficiaries. People often create these trusts to avoid the costs and delays related to the probate process that is involved in the execution of a will.
There are two types of living trusts: revocable and irrevocable. A revocable trust can be terminated or changed at any time up to your death. At that point, it becomes irrevocable, and the successor trustee must administer the estate as outlined. However, an irrevocable trust can’t be amended once it has been signed and finalized. Most people select a revocable trust for their estate.
Here are the top reasons why you need a living trust:
- Distributes Assets Quickly
When you set up a living trust, your assets, such as bank accounts, property, stocks and bond accounts, are transferred to the trust during your lifetime. This means that you can avoid the probate process that is associated with the distribution of assets according to a will. While you’re alive, unless you are otherwise incapacitated, you will typically be the designated trustee and have control over your own financial matters. After you pass on, the successor trusteewho you have named will handle the trust for you. This person may be your spouse, close friend, grown child, or even a lawyer. Since they won’t have to go through the probate process with a living trust, the trustee can distribute assets among your heirs much faster after paying off creditors and any other final bills of the estate.
- Provides for Minor Children
As a parent with minor children, it can be difficult to imagine them being able to handle large sums of money in a responsible manner. This is where a trust can prove to be invaluable for you. It can be used to hold the money you have set aside for your children until they are mature enough to make good financial decisions themselves. The trustee would disperse it as needed for their schooling, living expenses, and other incidentals until your children have reached the age you have specified in your trust document. In that event, the trust would then end, and all inherited property and other financial assets would be turned over to them to manage on their own.
- Saves on Estate Taxes
If you are married, a living trust can greatly reduce or even eliminate your estate taxes. In 2019, the estate and gift tax exemptionrose to 11.4 million per person. That means that a married couple can leave up to 22.8 million to their heirs without having to pay the federal estate or gift tax. This can result in significant savings for those who have a substantial estate.
- Keeps Your Wishes Private
A revocable living trust is a private document, so you won’t have to worry about someone accessing the specific details of your estate. Unlike a will, it does not get filed with the probate court, so no one will be able to look at it without the permission of the trustee. A will, on the other hand, is a public record that can give information about your estate. Once it is admitted to probate, anyone can look at the estate file to find out who the beneficiaries are as well as the list of assets. Unscrupulous people might go through this information to try to prey on the heirs of the estate. For some, privacy is paramount, so they choose to create a living trust in order to protect themselves and their beneficiaries.
- Protects You During Your Lifetime
If you have a trust in place and you somehow later become incapacitated, meaning you are no longer able to make decisions yourself, the trust will ensure that you are provided for until the time of your death. Your successor trustee will act on your behalf while you’re alive. They will be able to take full financial control of the trust, from paying the bills to selling the assets, as long as their actions don’t conflict with the instructions that you have outlined in the trust document. This is why it is so important to choose someone who you trust with the task of overseeing your trust.
Do You Need a Will Too?
In many cases, it is necessary for people to create a will along with a living trust. Many create what is known as a “pour-over will.”You may have created your living trust but have since gained more property or other assets in your name. This type of will ensures that anything you own goes into the trust upon the event of your death. It will, however, have to go through the probate process since it was not added to the trust beforehand. You must also utilize a will if you want to designate a guardian for your children if you happen to die before they turn 18 years of age. This cannot be done with a living trust.
Are you ready to get started on your living trust in Bakersfield? The Law Office of Kyle W. Jones can assist you with every step of the estate planning process. The first 25 to email in from our blog post gets a no-charge Estate Plan Consultation.