Can your family benefit from a living trust?
Obviously, it’s the wise and kind thing to do to set in writing what you wish to have happen with your property and belongings after your demise. Members of your family, who are more likely your heirs too, will have enough dealing with grieving for you without having to struggle with estate matters too. Protecting them from this pain is one of the benefits of a living trust.
There are two legally accepted ways to make your wishes known:
- A will
- A living trust
With the new year nearly upon us, many of us like to review the past year and prepare for the next one. It’s a time to look around and make sure that your affairs are in order. There is peace of mind in knowing that they are.
A simple will might suffice, however, a living trust makes sense for you if you own a house and, or, if your net worth is more than $20,000.
What are the differences between a living trust and a last will and testament?
Living trust: this is also known as a revocable trust. A large majority of people who create a living trust make it a revocable trust. This means you can revoke the trust at any time. By whatever name you call it, it’s still essentially a legal document to which you transfer your property during your lifetime. Then, upon your demise, or if you become unable to manage your own affairs, the successor trustee can take over. For instance, if you own a house and deed it to your living trust, upon your demise that house essentially becomes the property of the successor trustee who is now the trustee (the creator of the trust is typically the initial trustee). That is, unless your trust specifies that the house go to a different heir, then it becomes his or her property.
Last will and testament: this is a legal document that states how you wish for your worldly goods to be distributed after your demise. You name an executor who is charged with overseeing the distribution of your assets among your heirs.
Below are the five great benefits of a living trust.
1. A Living Trust Avoids Probate
A major benefit of having a living trust and funding it (transferring your property into the name of the trust) is that your heirs will not have to go through the long, often grueling, process of probate after your demise. It typically just takes a matter of a few weeks to manage property distribution with a living trust compared to a will which takes many months, sometimes years, depending on where you live and the amount of your estate.
2. A Living Trust Provides Privacy
Because you are not required to file a living trust with the recorder’s office, you have a lot of privacy dealing with your estate before your demise, and your successor trustee can distribute your assets to your heirs in total privacy as well. This is one of the benefits of a living trust that people often appreciate the most.
A simple will is made public. Anyone who wishes to do so can see how you chose to distribute your estate. This could create family issues at the next family reunion. Say you bequeath your favorite fishing rod worth $2,000 to your cousin Bernie, and a small painting worth $500 to another cousin. Jealousy could come of this. If you did this in your living trust instead of in a will, neither of them are even likely to realize it. Unless they visit one another’s homes frequently, that is.
Do you own property outside the state where you reside? It’s always best to manage and bequeath it under a living trust. Whereas living trust laws remain standard between the different states, laws for wills change from state to state.
3. Your successor trustee can take over if you become ill not just after your demise
If you become too ill to manage your own affairs, or you become permanently incapacitated, your successor trustee can simply take over where you left off. Without a living trust, the court will appoint someone, most likely a stranger to you, to take over your affairs. Sure, they’ll have to report to the court and get an approval for all expenses. But, do you want a stranger deciding what’s what for your estate? This is definitely part of the benefits of a living trust.
Also, with a power of attorney for health care decisions , you get to choose who will make medical decisions for you, rather than a court also doing that. A good living trust package will include one.
4. A Living Trust Saves Your Heirs Money
If your estate is worth enough to create a trust (more than $20,000 and/or you own a home), you will enjoy the benefits of a living trust, as well as the savings it brings your estate long-term.
It will cost you more to have one drafted than it would for a will—though we’ll tell you in a minute how to get one for a very reasonable price. Despite that, in the end it’s a better option. This is because the cost of probate would eat up more than what you save from drafting a will instead of a living trust.
5. Trusts Stand Stronger than Wills
You create a will and stick it in a drawer and let your heirs deal with it. However, a living trust requires more work on your part. That extra work is what makes a trust stronger than a will, among the benefits of a living trust.
You see, for your trust to be valid, you have to “give” your property to it. In other words, it owns the assets you transfer to it immediately, not just upon your death. It’s more difficult to contest it than it is to contest a will. This is because you, as the initial trustee, not only created the living trust, but acted upon it by funding it during your lifetime. Therefore, anyone who contests it is much less likely to win in court.
It’s really important for you to know and understand that a living trust is nothing at all until you fund it.
Funding it means:
- Quit-claiming any real estate you own to the trust (you still retain control during your lifetime)
- Changing the name of your bank accounts to the name of your trust (simply take the trust summary to your bank and they’ll do that for you)
- Having a pour-over will that bequeaths to the trust any property you haven’t had the time to transfer to it. This will does have to go through probate. Yet, because everything goes to the trust, it’s an highly accelerated process.
- Making the trust the beneficiary of your life insurance policy (not necessary)
If you are now convinced, you should have a living trust instead of a will, go here to save money on a complete living trust package. It doesn’t have to cost thousands. This living trust attorney has 20+ years of experience drafting trusts for high-end financial firms. They in turn charge their clients thousands for them. Eliminate that middle man and pay hundreds instead.