Why Set Up A Living Trust?
Posted on: 10 August 2021
While a will dictates what happens to your assets after you die, this isn't the only way to deal with your estate planning. Some people also set up living trusts. How do these trusts work and what are their advantages?
What Is a Living Trust?
A living trust holds assets for the future. It ring-fences money, investments, and property for the people you want to inherit your assets when you die. Rather than making them beneficiaries of your will, you set up the trust for them while you're alive. When you die, they get the contents of the trust according to the conditions you set.
You should appoint a trustee to manage the trust for you. However, you still control your assets and any income they earn while you're alive. Living trusts are also usually revocable legal documents; you can change them or even close them down if you change your mind in the future.
What Are the Advantages of Living Trusts?
There are a couple of advantages of a living trust. First, you don't lose control of your assets. Even though they sit in the trust, you can use them. Second, you can change the trust at any time.
As well as giving you benefits, this trust also helps your beneficiaries. They get easier and faster access to your assets after your death. For example, if you simply rely on a will, then your beneficiaries might have to go through a long probate process before they get their inheritances. This process becomes more complicated if you own property in different states. Each state might run its own probate process on your local assets.
If you have a living trust, then your beneficiaries won't have to go through probate. The trust already legally owns all your assets and sets its own conditions on their dispersal or management. It doesn't need to go through the traditional court system after your death.
While some people use living trusts to give out quicker inheritances, some use the trust to manage assets for beneficiaries into the future. For example, if you're leaving assets to children or younger adults, then you might worry that they will waste the money. So, you might direct the trust to pay them an income but to hold the assets in place until they reach responsible ages.
Keep in mind that a living trust is just one part of an effective estate planning strategy. To find out how to fit a trust into your plans, contact a will and trust attorney.
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