Living trusts are an effective way to handle an estate, particularly when it comes to providing clear direction as to how to and to whom assets should be distributed after death. But what is a living trust? Why should you have one?
A living trust expedites the process by which your heirs get their inheritance. While it can’t replace a will entirely, it’s easy to modify and it doesn’t require that you redraft the entire document each time you make a change.
Here, we’ll discuss some living trust benefits and under what conditions you would want a living trust. To learn more, speak to a Helena MT estate planning lawyer at Silverman Law Office, PLLC today.
An Estate Planning Attorney Can Help You Decide on the Right Type of Living Trust
Living trusts come in nearly limitless variety. Each, however, requires the aid of an attorney to set up and they all afford you a certain amount of control over your assets, especially when it comes to disbursement. They can be set up for the benefit of someone else or for yourself.
Your attorney will draft the trust after conducting an interview. You can then transfer property to the trust or transfer property out of the trust (depending on the type of trust). Trusts can last until the end of your life or dissolve on a certain date or if a certain condition is true. Two of the most common trusts are 1) revocable living trusts and 2) irrevocable trusts.
Revocable Living Trusts
These are trusts that allow you to both transfer property to the trust and transfer property out of the trust. The trust itself can be changed or restructured at any time. It can also be dissolved. Revocable living trusts are widely used for estate planning and asset disbursement instead of a will. They can also be set up on behalf of your children to be disbursed on a set schedule or to care for a special needs child who requires continuous medical care.
Irrevocable Trusts
As the name implies, these trusts cannot be revoked. They also cannot be modified or changed. They can be “testamentary” trusts that go into effect once the grantor (the individual who set up the trust) dies. Additionally, they can be set up on other timelines or upon other conditions. There are two main reasons to set up an irrevocable trust. The first is to reduce taxes and the second is to protect assets. Since property transferred to a revocable trust is property of the trust (and not you personally) these assets are not considered taxable and are not exposed to either creditors or lawsuits.
Why Set Up a Living Trust?
Trusts can also be set up for a number of reasons. Typically, revocable living trusts are used to distribute assets to heirs upon your passing. Irrevocable living trusts, on the other hand, are used to protect assets and lower your tax burden. They can also be used for charitable purposes. They can be dissolved on any condition that you establish upon the trust’s drafting, but cannot be modified once the trust has been drafted.
Understanding Living Trust Benefits
Living trusts have numerous benefits or using wills to disburse your assets after you pass. If you disburse your assets through your will, the first thing that happens is that they pass through probate. The court will establish its own trust composed of your estate and will contact your creditors to ensure that they are paid off first. Your family will get whatever is left over. On top of that, the court will charge fees which will come out of the overall value of your estate. Lastly, any assets that pass through probate are a matter of public record. Anyone can access those records.
Living trusts, on the other hand, can be triggered to dissolve on the moment of your passing and specify your disbursement wishes. Instead of passing through probate, the pass directly to your heirs. If your creditors want to go after those assets, they have to sue the trust directly which is costly and difficult. Any transfer that is not real estate will be kept private. Real estate transfers are always a matter of public record.
Furthermore, disputes involving living trusts and asset distribution are much more difficult to pursue ensuring that your wishes are executed after you pass.