When planning for the future, it is important to consider various options to safeguard assets and ensure their distribution according to your wishes.
One commonly used tool in estate planning is the living trust.
Definition of a living trust
According to CNBC, 67% of Americans do not have an estate plan. A living trust is a legal arrangement where an individual, known as the grantor, places assets into a trust during their lifetime. The grantor maintains control over these assets and can make changes or revoke the trust as they see fit. The trust also designates a trustee, who manages the assets within the trust and distributes them according to the grantor’s instructions.
Benefits of a living trust
One of the primary benefits of a living trust is that it avoids probate. Probate is the legal process through which the court settles a deceased person’s estate. It can be time-consuming and costly. By placing assets in a living trust, they can pass directly to beneficiaries without going through probate.
A living trust also offers privacy since it does not go through the public probate process. A will becomes a matter of public record upon probate. A living trust allows for a more discreet distribution of assets.
If the grantor becomes incapacitated, the designated trustee can step in to manage the trust assets without the need for court intervention.
Setting up a living trust
Establishing a living trust involves drafting a trust document that outlines the terms and conditions of the trust, including naming the trustee and beneficiaries. The grantor must then transfer ownership of assets into the trust, which typically involves re-titling bank accounts, real estate and other assets in the name of the trust.
It is important to regularly review and update the living trust to reflect changes in circumstances or preferences.
Everyone should have an estate plan. Consider the benefits of a living trust when putting a plan together.
