Do I need a living trust?
The “living trust” described in this material is a revocable living trust. It is sometimes referred to as a revocable inter vivos trust, or a grantor trust. A living trust may be amended or revoked by the person creating it (commonly know as a “trustor,” “grantor” or “settlor”), at any time during the trustor s lifetime, as long as the trustor is competent. A trust is a written legal agreement between the individual creating the trust and the person or institution named to manage the assets held in the trust (the “trustee”). In many cases, it is appropriate for you to be the initial trustee of your living trust, until management assistance is anticipated or required.
A living trust is a legal document drafted by an attorney and is an alternative to a will. If your property passes by will, a probate court action will generally be necessary after your death. However, if you prepare a living trust, no probate will be required after your death to transfer your property to heirs and beneficiaries. Although preparing a living trust is slightly more expensive than preparing a will, many people prefer this alternative because the costs and delays of a probate court action can be avoided. In addition, a living trust may minimize the estate taxes which must be paid. The person creating the trust can choose the length of the trust, the powers and duties of the trustee, the time the trust income and principal will be distributed, a guardian for the minor children, as well as many other options. A trust will be based on the creator’s specific needs and desires. A living trust must be created during the lifetime of the creator, but it may be changed, or even ter
You may have seen an advertisement in the newspaper, or perhaps you attended a financial planning seminar that described revocable inter vivos trusts, also known as living trusts. A living trust works like this: You execute a document, called a trust agreement, that creates the trust. The trust agreement names you as the trustee and the primary beneficiary of the trust. As beneficiary, you are entitled to distributions of trust assets whenever you want them. You then transfer your assets to the trust, so that when you die, you own nothing that is subject to the probate process. Some planners assert that everyone should have a living trust, while others believe that a will is all most people need.
The big advantage to making a living trust is a monetary one, since property left through the trust doesn’t have to detour through probate court before it reaches the people you want to inherit it. Probate, which may drag on for months, is the court-supervised process of paying your debts and distributing your property to the people who inherit it. By the time the inheritors get anything, a percentage of the property has been used for lawyer and court fees.
The big advantage to making a living trust is that property left through the trust doesn’t have to detour through probate court before it reaches the people you want to inherit it. In a nutshell, probate is the court-supervised process of paying your debts and distributing your property to the people who inherit it. The average probate drags on for months before the inheritors get anything. And by that time, there’s less for them to get: In many cases, about 5% of the property has been eaten up by lawyer and court fees. Still, not everyone has to worry about probate, and some people don’t need a living trust at all.
