Does your estate plan include a living trust? Forbes’ recent article, “What Is A Living Trust? Definition, Pros & Cons,” explains everything you need to know about living trusts and how to determine if one is right for you.
What is a Living Trust?
A living trust, also known as a revocable trust, is a legal document that allows individuals to transfer their assets into a trust during their lifetime. The trust is managed by a trustee of their choosing (often themselves initially) and specifies how their assets should be managed and distributed both during their lifetime and after their passing. Unlike a will, a living trust can help avoid probate, maintain privacy, and provide flexibility and control over the distribution of assets.
How Does it Work?
The grantor (or owner of the assets) transfers property ownership to the trust. They will name a trustee to manage the trust property. The grantor can choose to be the trustee, retaining control of trust property. However, the grantor can also designate a “successor trustee.” The successor trustee will manage the trust property if and when the primary trustee becomes incapacitated or passes away.
The grantor also names beneficiaries of the trust. These individuals are the individuals (or other entities) who benefit from the trust. The grantor designates beneficiaries who will inherit the property held within the trust after the grantor’s death. A significant benefit of a trust is that the assets held within the trust transfer to the beneficiaries without going through probate.
Creating a living trust entails drafting a formal legal document that:
- Establishes the trust
- Names the trustee (and successor trustee)
- Names the beneficiaries; and
- States when and how trust property will be transferred to beneficiaries.
The trust becomes effective as soon as you create it. However, because it’s a living trust, you have the right to cancel it or make changes to it any time you want to. Note that after you create the trust document, you must transfer the property title to it.
A living trust is a powerful legal tool. However, there are other estate planning documents that you may need. Contact an experienced estate planning lawyer, such as Thomas A. Vick, to get help creating a living trust, as well as assistance in developing a comprehensive plan to protect you in case of incapacity and to provide for your loved ones after you’re gone. Book a call with Vick Law, P.C. today to update you estate plan to include a living trust.
Reference: Forbes (May 12, 2023) “What Is A Living Trust? Definition, Pros & Cons”
