A trust is simply a document that legally allows a person, known as a trustee, to hold property for another person, called a beneficiary. Also known as an "inter vios" trust, a living trust is made while a person is still living, rather than after they have passed away. Establishing a living trust is a bit more complicated than making a will, but it can still be accomplished quickly and easily with the help of a
Often, the main reason that individuals create a living trust is to avoid probate. Your property doesn't have to go through the probate process because the trustee will transfer it directly to your beneficiaries. The court does not get involved because the property has already been legally transferred to your heirs. The trustee only has to fill out some simple paperwork and the process should be complete within a few weeks. Transferring property through a probate court can take months or even years if the will is contested. In addition, approximately 5% of your property will have gone to court fees.
Creating a Living Trust
To establish a living trust, you must first list out the property that will be included in the trusts, as well as the beneficiaries of the property. Next, you should name the successor trustee who will manage and transfer your property in the event that you die or are incapacitated. Once you choose your successor trustee, you can draft and sign the trust. Make sure to transfer the property to the trustee after the trust is completed; this is known as funding the trust. Without this step, the trust will not be considered legal.
Any property that you acquire or leave out of your living trust will need to be documented in a separate will. A will can have a clause that all items not listed in a will or the trust will go to a particular beneficiary. In fact, even if you do not exempt anything from the living trust it is still good measure to create a will. It can act as a back-up in case anything goes wrong with your trust. Without a will or trust, the state will decide your beneficiaries, which may cause your assets not to be transferred as you desired. If you don't want your assets going to an immediate family member, then it is especially vital that you create some type of an estate plan.
Types of Living Trusts
There are two main types of living trusts that a you may draft: revocable and irrevocable. A revocable trust allows you to control the assets throughout the duration of your lifetime. You can add to the trust, change it, or cancel it at any time. While this type of trust avoids probate, it does not avoid estate tax. Irrevocable trusts, on the other hand, cannot be touched after they are created. Once you sign the papers, you surrender all control over the assets named in the trust. This type of trust avoids both probate and estate tax.
Should you want to create a living trust, enlist the help of a qualified estate planning attorney in your area. A legal professional will be able to help you decide which type of trust is best for you, and can make sure that your wishes are carried out legally. This will help reduce of any problems that may arise after your passing. Creating a trust initially may be more expensive than drafting a will, yet it may be worth it in the long run. A probate lawyer will be able to assess the value in establishing a living trust for your specific situation.