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What is a living trust?

A living trust is a document that details what should happen to your assets upon your demise. A living trust is diffe ...

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What is a living trust?

A living trust is a document that details what should happen to your assets upon your demise. A living trust is different from a will in that it is a legal document that appoints one person (could be either a bank, an individual, or a firm) this person is called a trustee, who holds legal title to your property for your benefit during your lifetime and then hands over to beneficiaries upon your demise.

Inlay terms, a living trust can be used to distribute property before death, at death, or after death. The trustee performs the fiduciary duty of managing the assets for the beneficiary while the grantor (The owner of the assets) is still alive. 

Having a Living trust is currently a trend. A living trust is created now that you are alive and takes effect immediately upon the grantor’s signature on the document which becomes an enforceable document. Creating a living trust is one way to ensure that your wishes are met. One of the key instruments to conducting an estate plan is creating a living trust. There are a lot of advantages that come with having a living trust, one of which is that it helps you ensure that your family and loved ones are being treated the way you want them to be upon your demise.

Advantages of a Living trust

There are 3 major advantages of having a living trust;

  • It avoids probate. This means that upon your demise, they would be a faster distribution of your properties among your heirs.
  • It provides privacy. There is a level of privacy that is offered with a living trust. A living trust is normally not made open. What this means is that upon your demise, your properties would be shared and distributed privately. This also helps you handle out-of-state properties seamlessly.
  • Contrary to popular beliefs, a living trust may actually save you money. At first, drafting a living trust costs more than a will as a living trust is a more complex document. However, simply writing a living trust does not actually fund the trust. You have to transfer your assets such as your bank accounts, stocks, bonds, and certificates to the trust through separate paperwork. You would also have to change your beneficiary on your life insurance policy to the trust, this deals with your IRA plan. With this, a living trust can save your estate money at the time of your death as owning a living trust ultimately prevents you from probate. If peradventure you decide to do a “Pour-over will” which is a will that provides for the distribution of assets acquired after the creation of the living trust, just like any will, this would have to go through probate but court costs for probating your will are taken from your estate.

However, for people that have simple estate plans or for young married couples or adults with no children or no significant asset, a will would be a better option as a living trust in this case is not financially beneficial.

What you should know about a Living Trust

With a Living trust, you should know that once this is signed, your trustee takes the helm of affairs immediately the minute you become incapacitated or indisposed. What this means is that you get the choice to handpick your successor trustee who would manage all your assets without your courts’ intervention.

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