Can your family benefit from a living trust?
You know it’s the wise and kind thing to do to set in writing what you wish to see happen with your property and belongings after your demise. Members of your family, who are more likely your heirs too, will be grieving for you; that’s enough for them to handle. They shouldn’t also have to struggle with estate matters. Protecting them from this pain is one benefit of a living trust.
There are two legally accepted ways to make your wishes known:
- A last will and testament
- A living trust
With a new year nearly upon us, many of us like to review the past year and prepare for the new one. It’s a time to look around and make sure that your affairs are in order. You’ll find peace of mind in knowing 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 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 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 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.
5 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 escape the long, often grueling, process of probate after your demise. It typically 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 size of your estate.
2. A living trust provides privacy
Because you are not required to file a living trust with the recorder’s office (though you have the option to do so), you have 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 a benefit of a trust that people appreciate the most.
A simple will is made public. Anyone who wishes it can see how you distributed 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 is 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 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 must 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 includes a living will.
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, and the savings it brings your estate long-term.
It will cost you more to have one drafted than it would 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 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 important to understand that a living trust is just a document until you fund it.
Funding your living trust 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 must go through probate. Yet, because everything goes to the trust, it’s a highly accelerated process.
- Making the trust the beneficiary of your life insurance policy (not necessary).
Are you now convinced you should create a living trust instead of a will? Go here to save money on a complete living trust package. It won’t 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.