The 3 Benefits of a Living Trust
A carefully crafted estate plan helps prepare for the future, ensuring your legacy is passed on after your death. Many clients think that having a will is enough to ensure their assets are passed down to their heirs. However, a living trust provides more than just peace of mind, and the benefits of a trust are well worth exploring with a trusted adviser. Discussing this option with a financial professional can help ensure your estate plan ultimately achieves its goals.
How a Living Trust Works
Unlike a will that goes into effect after your death, a living trust is a legal document that's enforced during your lifetime. As the grantor, you designate a trustee with your living trust attorneys to manage the assets assigned to the trust. When you pass away, your successor trustee acts according to your wishes laid out in the documentation. Assets assigned to a living trust may include:
- Retirement accounts
- Real estate
- Valuable collections
- And more…
Once assets are assigned to the trust, you no longer hold ownership of them. You can be the trustee of your own living trust, or it can be managed by another person or firm. Depending on the type of living trust chosen, you may have some flexibility in managing these assets over the course of your lifetime. There are two types of living trusts:
- Revocable trust: A revocable living trust puts you in full control of the terms. From refinancing to removing assets, this trust can be amended or rescinded at any time.
- Irrevocable trust: Once signed, very few modifications can be made to this trust. Some people start with a revocable trust, and then convert it to an irrevocable trust later in life for added security.
How Can a Living Trust Benefit You In the Long Run?
A trust can address many issues that a will cannot. Depending on your individual needs and those of your beneficiaries, it may be helpful to incorporate a will and a trust in your financial plan. Outlined below are three of the most appealing benefits of a trust.
1. The Probate Process Is Avoided
The probate process is a court-supervised proceeding that recognizes a will, appoints the executor to administer the estate, and distributes assets to beneficiaries. Probate can be a very complex, costly legal process that extends for months, delaying the distribution of your assets.
Fortunately, living trusts can keep your assets out of probate court in the event of your passing. Because the trust technically owns your assets, they're managed directly by the person named as your trustee. The successor trustee can step in and promptly take care of your affairs at the end of your life without having to wait on a probate judge.
2. Your Privacy Is Maintained
When a will is submitted to the court for the probate process, it becomes a matter of public record. This means anyone can read about your debts, the value of your assets, and what's being distributed to your heirs, etc. A living trust, on the other hand, is a private document between parties. In this case, only your beneficiaries and (in some states) other heirs are the only ones permitted to view this documentation. By creating a living trust, you're able to keep family affairs private after you pass away.
3. Planning for Mental Incapacity Is Easier
Another benefit to having a living trust is that it can provide peace of mind in the event of mental incapacitation before death. If you become unable to manage your own affairs, your successor trustee does so in your place. The documents in your trust can specify how mental incapacitation is confirmed by your physician and how the transfer to your trustee is handled. At this point, your trust still retains ownership of your assets until you pass away.
Learn More from a Park Place Financial Professional
While it may sound a lot like a will, a living trust functions quite differently. This is not to say that a living trust should replace your last will and testament completely. In many cases, a pour-over will is still a necessary safety net that must be cast to catch any assets that don't fall under your trust.
If you would like to create a living trust as part of your estate plan, seek advice from the knowledgeable professionals at Park Place Financial. Our team can provide comprehensive solutions that best suit your needs. Schedule an appointment at our office in Bellaire, Texas.