When it comes to things like maintaining control of your assets during your lifetime and avoiding probate of your estate after death, a living trust is a great choice. It is common for clients to search for ways to avoid the time-consuming, expensive probate process, without having to relinquish complete control of their assets during their lifetime. Here are some of the most important living trust benefits you should consider when creating your estate plan.
Understanding what a living trust is and how it works
A “living trust” is a specific trust that, unlike others, goes into effect while you are still alive as opposed to after your death. Like other trusts though, the property you transfer to a living trust will be held and managed by your trustee until it is time to transfer the trust property to your heirs. That initial trustee is you, which means you maintain control over your assets.
Some of the most common living trust benefits
One of the most widely-recognized benefits of having a living trust is that your estate does not have to go through probate. Living trusts help avoid the time and expense of probate. They also provide several tax advantages, including lowering the potential for estate taxes. A living trust allows for more privacy than a will, for instance, which must go through the probate process, which is a public proceeding. Living trusts provide more legal protection than a will, as well.
Living trusts provide legal protection
Another advantage of a living trust is that it offers certain legal protections that other estate planning tools cannot. A living trust is an enforceable legal document similar to a contract. Therefore, if there are any challenges to asset transfers made pursuant to the terms of your living trust, a court, under most circumstances, would enforce the terms of the trust document.
You can modify the terms of your trust
Since living trusts are revocable, you can make revisions to the terms of your living trust at any point before your death or incapacity. Indeed, it is a good idea to review your trust agreement periodically to make sure it stays up to date. Basically, a living trust should be reviewed whenever there are changes of any significance in your life, such as the birth of a child or grandchild, marriage or divorce, and the death of a beneficiary or your financial circumstances.
You continue to control the property being held by your living trust
Of the many living trust benefits, being able designate yourself as trustee is one of the greatest benefits. Most people name themselves as trustee so they can retain complete control of their property during their lifetime. That means you can continue to buy and sell assets, as well as remove assets from and add assets to the trust whenever you choose. Also, if you are married you can designate your spouse as co-trustee.
Living trusts do not provide asset protection
Since living trusts are revocable, in general, they do not provide the benefit of protecting your assets from creditors or legal judgments. That is because a living trust can be changed anytime, so the property technically still belongs to you instead of the trust. Most asset protection trusts are variations of irrevocable trusts.
Discuss living trust benefits with your attorney
Before deciding whether a living trust is the best option for you, consult with an experienced and qualified estate planning attorney to discuss the benefits as well as any possible disadvantages. Although creating a living trust basically requires transferring the title or ownership of your assets to the trust, the provisions of the trust agreement need to be properly drafted. Therefore, it is wise to seek qualified legal advice and avoid the temptation to seek out a shoddy bargain basement trust.
If you have questions regarding living trust benefits, or any other estate planning needs, contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us at (916) 437-3500.