When you think about planning for your loved ones’ future after you are gone, a will is probably the first thing that comes to mind. However, there is another option: a living trust. Living trusts have become popular because they enable you to avoid probate and also maintain your privacy, since living trusts do not become public record upon your death. When you are making estate planning decisions, consult with an experienced attorney to determine whether a living trust is the best option for you.
What is a living trust?
A living trust is a document that sets out how your assets will be transferred upon your death and designates a trustee (or trustees) to manage your assets while you are alive. As the settlor, also called the grantor, you set up the trust and name a trustee or trustees to manage the trust. You must also transfer title of your assets to the trust; otherwise, your assets will not be transferred as you set out in the trust.
A living trust involves three parties: the grantor, the trustee, and one or more beneficiaries who make use of the assets in the trust. It is typical to designate yourself and your spouse as the trustees of the living trust so that you retain complete control over the assets in your trust during your lifetime. You can also alter the trust to suit your needs as much as you want, or dissolve it altogether. After you pass away, the successor trustee you have named takes control of the trust, managing or distributing the assets in the trust according to your specified instructions.
A living trust versus a will
The traditional and most widely known testamentary document is the will. Wills are easy to create and inexpensive, and they inform both your loved ones and the court of your intentions when it comes to your estate. Wills, however, have one major pitfall: they are subject to the probate process. The probate process can be lengthy, often taking a year or more to complete. Additionally, probate records are public, so the status of your estate and all of your assets is a matter of public record that anyone can view. This is a considerable downside for those who value privacy.
A living trust, on the other hand, is a private document about which only the grantor, the trustee, and the beneficiaries are knowledgeable. Unless a trustee or a beneficiary requires court approval of accounts, or a person contests the living trust, it will stay out of the time-consuming court system and away from the public eye.
Living trusts can be more complicated to set up, and more time-consuming to manage, than wills. Transferring legal title of your assets to the living trust is crucial, and it will take effort on your part to change the deeds to real estate, change ownership of your financial accounts, and complete any other steps necessary for this process. The complexity, though, also means that
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Trusts are more flexible than wills. For instance, you can write into your living trust how your assets will be distributed; if you want, you might specify that assets be distributed to a beneficiary over a period of time rather than immediately upon your death. If a will won’t accommodate your particular wishes for the transfer of your assets, a well-written living trust might just be the answer.
Is a living trust right for you?
The biggest advantages of a living trust are avoiding the costs in time and money that come with probate and keeping the details of your estate private, but there are other benefits to consider. If you have a loved one with special needs, or a child not yet old enough to manage his or her own finances, a trust can enable you to provide them with financial support without giving assets to them directly. A properly worded living trust can also be used as a substitute for powers of attorney. Remove hightlighed text. An attorney can help you tailor a living trust so that it meets all of your needs.
A trust is also an excellent choice if you have a large estate that will be subject to federal estate taxes. An estate planning attorney can discuss with you different tax minimization strategies associated with living trusts. Whether your estate is large or not, you should consider the advantages of a trust if you own property in another state, as a trust can enable you to avoid an out-of-state probate process.
Although there are fees associated with creating a living trust, once the trust is formed, there is no minimal dollar amount you have to maintain in the trust for it to stay in effect. A trust can hold anything from one dollar to everything you own.
Because a living trust is often a more involved document than a will, it is a good idea to seek professional advice should you decide to create one. An experienced attorney can explain to you the advantages and disadvantages of creating a living trust and help you decide if setting up a trust is right for you.
You have the power to provide for your loved ones with a living trust, so plan sensibly for your future by discussing your estate planning needs with a knowledgeable estate attorney. To learn more about setting up a living trust in Arkansas or to make an appointment, contact Estate Planners of Arkansas, P.A. today at 1-866-227-8165 for a free consultation.