Living Trusts are but one of many strategies for handling your estate. If you’re like most people, you probably don’t think much about this aspect of your life until someone close to you dies.
At that point, if you haven’t made prior arrangements, it can be a wake-up call that forces you to take action now – or risk losing control over the way you want things done after death. Having a living trust doesn’t eliminate the need for an attorney.
A living trust is essentially a legal document that provides instructions on how your assets should be managed and distributed after your death. The document itself is revocable (cancellable or amendable), meaning that you can change it if necessary.
A living trust may also act as the executor of your estate, which means that your estate must pass through probate court before assets are distributed according to the instructions in the document.
Pros
1. A Living Trust Simplifies Estate Planning
Creating an estate plan without a living trust can involve dozens of different documents and take months or even years to complete. With a living trust, estate planning is done one time only and involves just four documents. The benefit? You’ll spend far less time worrying about estate-planning logistics since most everything will be taken care of by the day you die.
2. A Living Trust Keeps Your Estate Private
If you create a will, your estate plan becomes part of the public record. Anyone can learn about your estate and how you’ve planned for it’s distribution once you’re gone – including creditors, ex-spouses, or even distant relatives looking to cash in on what they feel is rightfully theirs.
But estate planning managed by a living trust remains completely private. The only people who would be privy to information about your estate are those you designate as beneficiaries.
3. A Living Trust Makes It Easier to Secure Minor Children’s Inheritance
Without a living trust, parents must designate a guardian to oversee their minor children’s inheritance until they turn 18 years old. If no such designation is made or the designated guardian dies before the children are grown, then state law determines how that money is spent.
With a living trust, you can appoint both a trustee for estate administration and a separate trustee to oversee your minor children’s inheritance. This way, if something happens to the adult trustee (your spouse), the child’s trustee (someone you’ve selected) will step in and continue managing those assets as intended – without additional court intervention or oversight.
4. A Living Trust Makes Estate Planning Easier on Family Members
The estate-planning process often creates tension between family members who disagree about what should be done with mom and dad’s estate after they die. But with a living trust, you have complete control over who inherits each part of your estate and when they get it.
Instead of fighting over who gets what and arguing about who was more deserving based on their relationship with you, family members can simply honor your wishes and move on with their lives.
5. A Living Trust Eliminates Probate for Your Family Members
If you don’t have a living trust or estate plan, your estate will likely be subject to extensive probate proceedings once you die. This means that the recipients listed in your will must submit paperwork to the courts in order to receive their inheritance.
While this often happens after death is pronounced, some courts require beneficiaries to file the proper paperwork even sooner – such as thirty days before death in some cases.
With a living trust, estate administration is handled by the trustee of your trust – often yourself, if you’re still alive. This eliminates the need to get approval from a judge or jump through any additional hoops in order to receive your inheritance.
Cons
1. A living trust only serves the estate during the estate owner’s life.
One reason to consider estate planning is so that your estate can take care of itself after you pass away. Your estate will not receive help from the living trust if it does not receive help during your lifetime or if you do not give it resources or money before you die.
2. A living trust may be more expensive than other estate planning methods.
Your living trust attorney may charge you an hourly fee to set up your living trust, and then you’ll have yearly fees that are required for every estate plan, which comes out to about $1000 annually (or maybe more). You should compare this cost with other estate planning options, such as a simple will, which will probably only cost you a few hundred dollars.
3. A living trust does not remove estate taxes from your estate when you die.
In order to reduce estate tax exposure, consider the use of life insurance and estate planning strategies such as a bypass trust or dynasty trust in addition to using a living trust. By utilizing all estate planning tools available, it will be easier for your estate to pay any estate taxes that may apply. If there are estate taxes that remain unpaid after your death, then your heirs may have to sell some of your assets in order to pay the remaining amount owed.
4. The living trust must go through probate before it can be effective.
If you want to avoid probate completely, make sure all deeds and titles for real estate that are titled in the name of your living trust are done with your estate planning attorney. You should also make sure that all bank accounts or other assets such as vehicles and stocks are titled in the name of the trust during your lifetime, instead of under individual names.
5. The estate owner cannot control what happens to his estate after he dies if a trust is used.
If you want full control over how and where your estate goes after you die, then you should consider using an estate plan with a will instead of a living trust. If there were any problems occurring within the estate before death, those same issues might occur once again because there was no provision made prior to death regarding those situations.
Conclusion
When it comes to estate planning, there are so many things to think about in terms of protecting yourself and your family in the event of incapacity or death. Luckily, there are steps you can take now in order to plan for this inevitability, potentially saving yourself and your family valuable time, money and stress.
As estate planning attorneys, we know that estate planning is about protecting your assets for you and your family. But estate planning can also be used to help manage trust today.
The pros and cons of having a trust are outlined above, but the most important thing that you must remember with estate planning is to speak with an experienced estate planning attorney who can fully assess your situation. Estate Planning is complicated and requires proper legal advice before acting on any estate plan.
See more at https://theeastmanlawfirm.com/
