Definition of a Living Trust
A Living Trust (also called an “inter vivos” or revocable living trust) is a legal document that allows you to control your assets while you are living, and can provide for the care of you and your loved ones if you become incapacitated. The trust also provides instructions for how and when your assets will be distributed to your loved ones after you pass away. You may transfer assets to your trust during your lifetime, or it may not be funded until after your death. The trust is flexible, because you may revoke or amend the trust, and transfer assets into and out of the trust during your lifetime.
Avoid Court Intervention by Creating a Living Trust
Leaving assets to minor children in trust can avoid court intervention, and can allow the person you choose to manage their money instead of the court. Leaving assets to your adult children in trust can provide them with creditor protection, spouse (or divorce) protection, and can keep the money in the family. Contact us to find out if a living revocable trust is appropriate for your family.
Benefits of a Living Trust
The main benefits are:
- Privacy: Upon death a living trust is not made public. The distribution of the assets will be in private.
- Avoid Probate: Assets in the trust at the time of your death do not go through probate. This in turn means a faster distribution to your heirs.
- Flexible Management of Assets: You can change, add to or even terminate the agreement. You can also name trustees, beneficiaries with less hassle than rewriting your will
- Planning for Mental Incapacity: You can plan for mental incapacity within your trust. The trust document can specify how it should be determined and identify the successor trustee that will step in and manage your finances and property on your behalf.
Living Trust vs Will
How is a Living Trust different from a will and do I need both?
A will distributes to your beneficiaries all assets not already in your living trust at the time of your death. A living trust is not for everyone, however. If do you have a living trust, you still need a will, in the event there is an asset that is not owned by your trust at your death. If desired, your will can provide that all other assets go to your spouse or children’s trust when you die.
Do you need a Revocable Living Trust?
Two of the main reasons estate planning attorneys might recommend a Living Trust are:
- Avoid costly, court appointed and supervised guardianship if you become mentally incapacitated
- Avoid costly probate when you die
Some points to consider when deciding if you need a Living trust are:
- Business Owner:
A living trust is especially important for a family business as the trust can hold your business interest and your successor trustee can continue to manage the business if you are incapacitated or when you die.
- Privacy of assets and Beneficiaries:
The will becomes public, listing your assets, beneficiary names and addresses, what you own and who you owe money to when you die. The irrevocable living trust will only be seen by your successor trustees and beneficiaries that are named in the trust when you die.
- Your Assets:
If you have a couple of bank accounts, life insurance and a 401(k) then a Trust will not be required. You might need a durable power of attorney and a medical power of attorney to give an agent authority to manage you and your finances when you are incapacitated and a will to deal with the assets when you die. If you are wealthy or you have assets in different states then a living trust will be beneficial.
- Funding the trust:
If you buy a living trust and never fund it then there is no benefit. There is a cost involved in moving assets into your living trust.
The best option is to discuss your specific requirements with our living trust attorneys so we can advise you on the best solution.
Contact us to speak to one of our living trust lawyers in Plano.