Roughly a fifth of Americans use living trusts as part of their estate plans. It is a sensible option for many retirees. In fact, according to Beck & Lenox Estate Planning and Elder Law, if more Americans knew of a trust’s benefits, that number would raise dramatically. What should you know about living trusts?
Motley Fool’s recent article, “What Is a Living Trust?” explains that a living trust is also known as a revocable or inter vivos trust.
It’s a legal document that lets people transfer their assets into a trust while alive. In doing so, the individual, known as a grantor or settlor, can manage the trust until they die and make changes as necessary.
A living trust ensures that your assets are distributed according to your wishes after your death. It has several advantages over other methods, since it replaces a will. First, it lets your descendants or beneficiaries avoid probate court, which can be time-consuming. A living trust can also protect your and your family’s privacy. A will, on the other hand, becomes a public record once it enters probate.
The revocable nature of the trust permits you to make changes as needed or even revoke it if you decide it no longer suits your needs. Finally, a living trust also makes it simple for someone else to manage your assets if you become incapacitated, avoiding the need for a court-appointed guardian or conservator.
Among the drawbacks of a living trust is requiring their own sets of record-keeping and filed tax returns. That’s because a trust is a separate financial entity from your own assets. Living trusts also have a more extended contesting period than wills, allowing beneficiaries to protest any distribution from the trust for one to five years after your death. The benefits of a trust far outweigh these particular requirements.
A living trust can help ensure that people with blended families or complicated family situations can control how their assets are distributed. For example, if you had children from a previous marriage but remarried, you’d want to ensure your spouse and your children are cared for, even if they’re at odds.
Ask an experienced estate planning attorney what you should know about a living trust and if one makes sense for you. A free consultation by phone with a Beck & Lenox attorney is available by scheduling online.
Reference: Motley Fool (July 20, 2023) “What Is a Living Trust?”