One of the main purposes for using a living trust in estate planning, is to avoid probate, a process that is often rather expensive and time-consuming. Nearly every state’s probate laws provide that the property owned only by the deceased must go through probate if there is no estate plan in place. Before you decide whether you need to establish a living trust, you should think about both the advantages and disadvantages of a living trust. There are other options, if you want to avoid probate.
The definition of a Living Trust
A “living trust” is simply a type of trust that becomes effective while you are still alive, as opposed to only going into effect upon your death. As with any other type of trust, the property that you transfer to the trust will be held and managed by a trustee, to later be transferred to your beneficiaries. In most cases, a living trust will cover only certain property or assets, instead of the entire estate. And like other parts of an estate plan, a living trust has its pros and cons.
The advantages of a living trust
Avoiding probate is an obvious advantage to creating a living trust. A living trust will ultimately save you time and money, as well as avoid possible complications that can arise when it is time to distribute assets to beneficiaries or heirs. There are also some great tax advantages associated with a living trust. This type of trust can help to reduce the amount of estate taxes imposed on your estate upon your death. Also, the terms of your living trust remain private, as opposed to the public nature of the probate process. If maintaining the privacy of the nature of your assets or finances is important to you, then a living trust is probably a good option.
Living trusts offer legal protection
There are particular legal protections that a living trust will provide. First, because a living trust is a written legal document, it will be enforceable by the courts. If anyone ever challenges any of the asset transfers made after your death, the terms of the trust document provide the best evidence of your intent.
The disadvantages of a living trust
Along with its many advantages, there are also disadvantages that you should consider before making a choice. A living trust only covers property transferred to it, for instance. For this reason, the language of a living trust should be as detailed as possible in describing that property. It is also very important to avoid conflicts or contradictions between the terms of your living trust and any other estate planning instruments you have created.
You may also need a durable power of attorney
Something else to consider is the possible need to create a durable power of attorney, as well. You usually name yourself as the original trustee, so that you can maintain control over the trust while you are alive. However, a successor trustee may not have the authority to manage any additional property you owned while you are incarcerated, if it was not included in the living trust. That is where the need for a power of attorney will come in.
If you have questions regarding living trusts, or any other retirement planning needs, please contact Wilcox Attorneys, PA online or by calling us at (470) 443-0062.
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