Estate planning is a crucial aspect of ensuring your assets
are managed and distributed according to your wishes. One popular tool for
achieving these goals is the living trust also known as a revocable trust or
family trust. Numerous types of assets can be put in a living trust including real,
personal, and intellectual property, financial accounts like bank accounts and
CDs, investment accounts, and business/partnership interests. Living trusts don't
require separate EINs or tax returns during life, however upon death the trust
becomes irrevocable and a form 1041 is required. Let's delve into the various
benefits that individuals can enjoy by creating a living trust as part of their
estate planning strategy.
A significant advantage of establishing a living trust is
the ability to bypass the probate process. Unlike wills, which often require
court supervision and can be time-consuming, assets held in a living trust can
be distributed directly to beneficiaries without undergoing probate. This can
save time and money and attorney's fees while streamlining the distribution
process.
Privacy is a key concern for many individuals when it comes
to estate planning. Living trusts provide a higher level of confidentiality
compared to wills. Since probate proceedings are public, opting for a living
trust allows you to keep the details of your estate private, shielding your
financial affairs from public scrutiny.
A living trust enables individuals to plan for the
possibility of incapacity. By appointing a successor trustee in the trust
document, you ensure that someone you trust can step in to manage your affairs
if you become unable to do so. This proactive approach can provide peace of
mind for both you and your loved ones.
Assets held in a living trust may enjoy some level of
protection from the creditors of the beneficiaries after the death of the
grantor. This can be a valuable feature, especially in situations where
protecting assets from potential creditors is a priority. Prior to the death of the grantor, a creditor
can file a claim against the trust, so there is little protection for the person
setting up the trust. However, after the death of the grantor, the
beneficiaries do have more creditor protection.
The avoidance of probate means that assets held in a living
trust can be distributed more quickly and efficiently to beneficiaries. This
can be particularly advantageous if immediate access to funds is needed for the
well-being of your loved ones.
While there are upfront costs associated with setting up a
living trust such as re-titling assets, it can potentially result in long-term
cost savings. By avoiding probate expenses, court fees, and legal costs,
individuals may find that the overall expenses associated with a living trust
are more favorable compared to other estate planning options.
In the event of your death or incapacity, a living trust
ensures a seamless transition of asset management. The successor trustee can
step in without the need for court intervention, providing continuity and
stability in the management of your estate.
For individuals with assets in multiple states or countries,
a living trust can be a valuable tool. By avoiding probate in each jurisdiction
where assets are located, a living trust simplifies the estate planning process
for those with diverse holdings.
A living trust can be a versatile tool in estate planning,
and one of its key features is the ability to create other trusts. This process
involves using the living trust as the primary document to establish and govern
additional trusts, often referred to as sub-trusts or testamentary trusts. Some
examples of these additional trust are, residuary trusts, marital share trusts,
QTIP trusts, spendthrift trusts, and irrevocable trusts.
In conclusion, the benefits of creating a living trust are diverse and can be tailored to individual needs. However, it is crucial to consult with legal and financial professionals to ensure that a living trust aligns with your specific circumstances and goals. Taking the time to plan now can offer peace of mind and financial security for you and your loved ones in the future. Contact your HLBGC representative or our Estate and Trust Practice Leader, Patti Benjamin, for additional information on how a Living Trust can be a valuable part of your overall estate plan.