This is a collaborative post on Estate Planning by Ronald.
Financial management and estate planning are complex and difficult subjects. There are multiple decisions to be make and various aspects to consider. When it comes to matters like inheritance and property, it’s always a good idea to be smart and plan accordingly. As you age your concerns over protecting your assets and property are a given. Two popular forms of estate management are establishing a living trust or a will.
Are you wondering whether establishing a living trust is the right choice for you? Read on to understand the benefits associated with establishing a trust.
What Is a Living Trust?
A living trust is a legal document that allows one to transfer their assets to a beneficiary after the trust creator’s death. The assets can be anything that holds value like bank accounts, property, vehicles, business assets or personal items. This document allows the trust creator to have complete control over where they shift their assets. It also helps avoid the complexities involved with probate. Most living trusts are revocable, so they can be canceled or changed as the grantor pleases. Moreover, the transfers are managed by a trustee who is appointed by the grantor.
Should You Consider A Living Trust Or A Will?
Making an informed decision about the distribution of your wealth is not easy. You may have many questions like can you have both a will and a living trust? It’s important to get a basic know-how of trust law and estate law. You can consult an expert for this or do your own research to better understand which one is suitable for you.
Generally, a living trust is a particularly good option for those who are getting old and have accumulated wealth. However, for those who are young or have children who are minors, a will can be a better alternative. Moving on, let’s look at a few of the many advantages of having a living trust.
What Are The Advantages Of Having A Living Trust?
The biggest advantage of establishing a living trust is avoiding probate. Probate is a legal procedure that settles the grantor’s assets under the supervision of the court. It is costly and time-consuming, but it is a legal requirement. Probate helps prevent ill practices like fraud.
When undergoing probate, one has to ensure that all the formalities like guaranteeing of the will, identification of property and clearing of taxes are completed. Unless these formalities are met, the assets are not divided between the beneficiaries. This is obviously very time-consuming. However, with a living trust set up, you are under no obligation to go under probate. Avoiding probate helps save time and money. It can also be helpful in terms of avoiding any other kinds of court trials and challenges
Also read What is a Grant of Probate.
When matters like the division of assets have passed through court, it usually becomes a public matter. Listing of assets, their values and information will be in the eyes of the public or people in court. In contrast, a living trust can help keep privacy as the document is not required to go under court proceedings/probate. Instead it is managed by the appointed trustee.
A minor is anyone below the age of 18 that requires a legal guardian to care for them. Since minors are not equipped to handle financial matters; thus, establishing a trust can be helpful. The grantor can either set a specific age limit for the child or distribute the assets at different intervals to accommodate the child’s needs and wants as they grow up.
Not all adults are capable of managing finances on their own. Some may suffer from serious issues like drug addiction, medical issues, or may just have poor financial management. Setting up a living trust ensures that funds are distributed in accordance to need. Also, it can prevent the assets from getting squandered.
Keeping assets in the family
A living trust can also help prevent significant portions of your inheritance from falling into the wrong or ‘unwanted’ hands. For example, one of your children may get a divorce causing your assets to transfer to their ex. With a living trust, the trustee will ensure this is not the case and that the assets remain within the family.
Decreased Estate Taxes
An estate tax is paid by someone who has inherited the estate of a person who has died. Having a living trust can help reduce these estate tax. This is especially true for those who are married and possess a joint living trust. In this case the trust can help pay the estate tax. This savings can be substantial.
Final Thoughts On Living Trusts
Financial decisions are never easy to make. Living trusts are great vehicles for estate planning. It allows you to control the distribution of your assets and protect your privacy even after you have passed.