With fast-moving technology and industries, life is moving quickly. No one has time to sit down and write an old-fashioned will nowadays. Even if they do, there is no guarantee that a will, will ensure a timely and just distribution of your assets. This is why more than 20% of Americans have chosen to set up a living trust over a will. A trust is one of the best estate planning tools you can use.
In addition to asset protection, tax planning, Medicaid planning, and business succession, trusts can be used for many other things as well. But before we talk more about living trusts and explain why you should establish them, we first need to understand them.
What Is A Living Trust?
A living trust is a genuinely legal way to ensure that assets are delivered to the right person or the right causes that the grantor intended for. It is called a living trust because it is established when the grantor is still living. After the passing away of the grantor, a trustee is selected by the grantor and ensures the timely and proper distribution of your assets. A living trust can be revocable or irrevocable. Establishing a living trust is quite straightforward, even though you can easily establish a living trust online too.
Only the grantor can revoke or amend a revocable trust. In contrast to what many believe, a living trust is not only for rich people. Many people prefer it over a will because it is an easy way of ensuring your wealth goes to the persons or causes intended for.
As you now know what a living trust is, let us discuss its benefits.
Lesser Estate Taxes
Establishing a living trust will not only save your beneficiaries a lot of headaches but also thousands in taxes. If the trust’s grantor is married, the trust will provide estate tax savings. This lets the beneficiaries, in legal language, inherit the assets instead of taking over assets, which saves them a lot of money in capital gain taxes. Besides this, a living trust also saves a lot of money by avoiding probate, court, and lawyers’ costs.
Your assets won’t be divided by the State
Generally, estate planning offers this benefit. When you die without an estate plan, the state’s laws (intestacy laws) will decide what happens to your possessions. You won’t have any say.
If this happens, your assets will be transferred to someone you don’t trust, or your estate will be controlled by someone you don’t like. You might even end up losing your assets to the government.
An estate plan can change that outcome, however. One option is to set up a living trust. Living trusts allow you to alter the default distribution order and ensure your estate is distributed according to your wishes.
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Protecting Your Privacy
Probate cases are public records and are on display for everyone to see; this means that the nosy people you kept out of your life during your lifetime get full access to see your assets and trustees. As it is a public record, people may also be able to peek into your private life and see if you have any criminal or legal records. This is a huge invasion of privacy, but it cannot be stopped because it is a public record. To avoid all these headaches, people establish a living trust. Because living trusts are not to be filed with the court, your and your trustee’s information is safely protected.
Probate is something no one wants. How does probate work? During probate, the court decides how assets are distributed or supervise the process if a will is present. It has several drawbacks, including your name coming into the public record, court fees, lawyer fees, etc. to avoid this, people establish living trusts. There is no need to file with the court in a living trust, as the trust is established with the grantor living. So the disadvantages of probate go away with it.
Protect Minor Children
Minor children are not set up to handle assets or large sums of money independently. Many people establish living trust because they can control at which age their children receive their inheritance and to what extent. Some people would prefer their children to get their heritage at once when they turn 18. However, some people like their children not receiving their inheritance at once. Instead, they get it over staggered ages 20, 25, and 30. It doesn’t matter, though. Once you establish a living trust, you decide who gets their inheritance at what age.
The benefit of setting up a living trust is that you not only protect your beneficiaries, but you also protect yourself. If you get incapacitated during your lifetime, a living trust ensures you get the money and the care you require. A living trust protects your interests. The trustee of your trust may be able to release funds to care for you if you are incapacitated. Because of this, you want a living trust set up so that you will be taken care of if you get incapacitated.
A flexible approach
Trusts provide greater flexibility when assets are distributed, including upon death. Living trusts can also outline how assets will be managed if you become incapacitated. Living trusts, for instance, can be irrevocable or revocable. It is possible to change a revocable living trust but not an irrevocable one. A living trust can also be created as an income-only trust. An estate-planning attorney may be able to advise you on how to manage your assets in complex situations. By establishing a living trust, you can manage your assets according to your wishes, including how they are transferred to your heirs.
Simplify the Inheritance Process
By establishing a living trust, you simplify and speed up the inheritance process for your beneficiaries. In the case of probate, it is not uncommon to see a delay of two years before the beneficiaries receive their inheritance. Probate involves hundreds of legal procedures. First, the court sets a date, then a contract has to be signed, and then the search for a potential buyer of assets starts. After the buyer has been found, the court has to approve the sale and on and on. To bypass this hectic procedure, people set up a living trust so their beneficiaries can receive their inheritance easily.
Overall, we can say that a living trust is no longer an option but a necessity for ensuring that your inheritance reaches the right people.
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