Living Trusts
What is a living trust?
A living trust is a written legal document often used for estate planning purposes. One of the main benefits of a living trust is that they can facilitate a smooth and quick transfer of assets upon death. Here is a simple example of how a living trust works:
“Betty loves her family and wants to make sure that her assets get distributed to her loved ones. Betty creates a legal living trust. In the living trust, she names herself as the trustee and designates several beneficiaries. After creating the trust, Betty places her assets (money, a home, stock, etc.,) into the trust. Since Betty is the trustee, she has full control of the assets and can use them as she wishes. Upon her death, the assets in Betty’s trust are distributed, according to the instructions given by Betty, when she created the trust.
The situation described above is known is a basic revocable living trust (sometimes referred to as a revocable inter vivos trust or a grantor trust). These types of trusts are known as revocable trusts, because you can change them, or even revoke them while you are alive.
What are the benefits of a living trust?
A revocable living trust is beneficial because:
- It can help ensure that your assets are transferred quickly and easily upon your death without having to go through the time consuming and expensive probate process. Learn more about probate here.
- It can also help to ensure that your assets will be managed according to your wishes in the event you become incapacitated
- Revocable living trusts generally remain private, whereas wills often become a part of public record.
- Trusts allow you to dictate how your assets are used and give you flexibility in carrying out your wishes. For example, you can specify how you want your money to be spent in case you are incapacitated, such as defining the nursing facility you want to be in.
- Can be used to hold assets in trust for young children until they mature
