Over the coming weeks we’re going to look at various types of trusts and why they are important in estate planning. To begin with, let’s take a look at living trusts. Living trusts are one of the most commonly employed trusts for estate planning purposes, serving a variety of needs. Here’s what you need to know.
One of the primary benefits of a living trust is that the property the trust owns does not have to go through probate. You can think of the trust like a corporation. Neither really exists in a physical form, but the law recognizes that they can own property. Because the trust owns property at the time you die, the trust property does not have to go through probate before someone else becomes the new owner.
Because the property owned by a living trust does not have to pass through probate, that means the living trust terms do not become public information. If, for example, you decide to pass property through a will, the transfer will become public. When you die someone will have to submit the will to probate and anyone who wants will be able to inspect it. A trust allows you to transfer property privately with notice provided only to interested parties.
Taxes and Liability
Even though a simple living trust has significant benefits, it is not suitable for protecting you from estate or income tax liability, nor does it shelter trust assets from potential creditors. While other trusts can aid in these goals, a revocable living trust will not be sufficient to do so.