What is a Living Trust?
A Living Trust is a legal document, created during a person’s lifetime, whereby the person’s property is transferred to the trust and held and administered in accordance with the terms of the trust.
The individual who establishes the trust and whose assets are transferred to the trust is known as the “trustor.” The “trustee” is the individual who manages the trust assets. Generally, the trustor will be the initial trustee and will appoint a successor trustee to take over upon the trustor’s death. This allows the trustor to remain in control of the Living Trust during his/her lifetime and maintain all rights previously held as owner of the assets. The trust assets are held for benefit of the trustor during his/her lifetime and then transferred to beneficiaries upon the death of the trustor.
Most Living Trust are revocable and amendable by the trustor, which means changes can be made during the trustor’s lifetime or the trust can be revoked in its entirety. A Living Trust, therefore, affords flexibility and control
A Living Trust is one component of a complete estate plan. If you have a Living Trust, you must also have a pour-over will to cover any assets that are not transferred to the trust. Also, an advance health care directive and power of attorney for asset management are important part of an estate plan. You should consult with an attorney to ensure that you have a complete estate plan.
Benefits of a Living Trust:
– Avoids Probate. If the title of all your assets are in your trust, your estate will avoid probate, saving significant costs and time.
– Management of assets. A trust provides for the management of your assets by your trustee in the event of your incapacity.
– Management of assets for minors. Your trustee can manage assets left to a minor beneficiary until the beneficiary reaches the age you select.
– Privacy. A trust is privately administered by your selected trustee without becoming part of the court’s public record.
Will having a Living Trust avoid Probate?
A Living Trust will avoid probate only for those assets where the title has been transferred to the trust (or for some assets, which have the Living Trust as a beneficiary). Even with a Living Trust, it is possible that a part of your estate will go through probate if you do not title your assets appropriately or if you forget to transfer title of your assets to your Living Trust. For this reason, it is best to have a qualified estate planning attorney advise you on the proper procedures for setting up a Living Trust to ensure your estate avoids probate.
What happens at death if I have a Living Trust?
The individual you select as your successor trustee will “administer” the trust, a process known as
“trust administration.” Unlike probate, a trust is administered privately and without court supervision.
Trust administration still requires some work, however. Your trustee is required to notify your heirs and beneficiaries about the trust and fulfill other duties, such as paying your debts, expenses and taxes, preparing an accounting of trust assets, collecting trust assets and distributing assets in accordance with your wishes, and managing assets for minor beneficiaries.
Even with a trust, a part of your estate may have to be probated if you did not title all of your assets in the name of your trust. Also, if a trustee does not administer a trust properly, court intervention may be required.
Should I have a Living Trust or a will?
A Living Trust may not be appropriate for everyone. You should confer with an attorney to determine which option is best for your particular situation.