• Amber Wright

What a Living Trust Is

A living trust is a legal document, called a Trust, which an individual creates during his or her life. A nominated person called the trustee is given responsibility for administering and managing that individual's assets for the benefit of the actual beneficiary. A living trust is designed to make the transfer of the trust creator’s assets less complicated while bypassing the often complex and expensive process of probate. Living trust agreements designate a trustee who holds legal control of assets and property that flow into the trust.


Once a living trust is created, it takes effect immediately while you are living. It is also named a Revocable Living Trust because it can be changed or revoked partially or entirely any time as the asset creator’s wishes during their lifetime. However, careful to not confuse this with a Testamentary Trust, which is specified in a Last Will and takes effect after an individual’s death. Like all the types of trusts, a Living Trust is an agreement in which a trustee, appointed by the owner of the property and creator of the trust, takes care of the specific assets on behalf of the beneficiary or beneficiaries named in it. The beneficiary can be anyone set by the possessor of the property. During a person’s lifetime, the goals and objectives may change at certain points, this Trust is flexible and can change or be modified for the terms of the Living Trust accordingly. That includes a change of beneficiaries or the termination of the arrangement entirely. Additionally, it is possible to specify whether the trust will be terminated upon the individual’s death or be continued for the sake of their beneficiaries. Most people nominate themselves as their own trustee as long as they are alive and capable. Additionally, when the donor decides to take a break from worrying about investments and management of the assets and more, they can elect their successor trustee to accept and fulfill those duties.


The answer to who benefits the most from living trusts is never easy or short. This is because living trusts offer numerous benefits for many people who:


•Want to enjoy what they're earning, but do not like the ongoing commitments of managing capital.


•Want to set a financial program for the future benefit of their family or favorite charity.


•Travel off and on because in that case, it becomes difficult for them to manage their financial affairs.


•Lack experience of managing finances.


•Have health concerns or have doubt on their future ability to manage financial affairs and seek sound advice from an objective, knowledgeable and professional organization.



Living trust advantages


Living trust offers numerous advantages regarding investment management, service affordance, welfare assurance, lower cost management and so on. Here its strengths are discussed below:


Investment management expertise


You can enjoy more free time designating your trustee for managing your assets with the help and advice of the professionals. They can design a suitable investment program for you based on your circumstances and can handle all clerical and administrative proceedings for the trust on behalf of you.


Affordable services


Living trusts usually cost very little to establish and maintain. A more convenient part is that these costs are often offset by investment gains, lower probate cost and tax savings.


Your welfare is the priority


In case you become seriously ill or incapable of managing your own personal finances, your trustee can be authorized to pay medical and other bills. Your assets will be readily available for your benefit.


Lower estate settlement costs


Some trust properties are taxable, such as distributions, and some are not taxable such as the inheritance of a home. In general a trust helps to avoid probate procedures. So, the estate settlement costs are considerably reduced.


Efficient income distribution


The flow of income from the trust to your beneficiaries can continue with least interruption because trust property is not subject to probate procedures and consequently, the transference of trust property can be shortened without any delay involved in probate estate settlement.


Personal privacy


Since will and testament are public documents, through probate, their contents including the names of your beneficiaries and the amount willed for them become public knowledge. Contrary to the procedures of your will settlement, a living trust is a private agreement and its contents remain private even after your death.


Fewer legal disputes


Relatives, who believe to be eligible to entitle to more than they receive, may challenge the content of a will. But dispositions under a living trust are more difficult to challenge. It is hard to prove such claims like mental ineptitude or undue influence because the operation of a living trust is established and observed during the individual’s lifetime.


Valuable estate planning insights


While monitoring the activity of your living trust, you get to know how effectively your trustee manages your valuable trust and will provide investment services to your family in the future. Moreover, if you find it necessary to make any change based on your changed objectives, a living trust allows you to accomplish that.


Strong financial foundation for your family


The living trust that you and your financial advisor design can be continued after your death benefitting your family. It will provide three distinct advantages including experienced financial management, uninterrupted payment of benefits, no probate- associated cost or delay. You can also use your living trust to coordinate other assets. Life insurance proceedings or retirement benefits can be paid into the trust and your assets can be carried over from your will to the trust. This kind of flexibility ensures that your living trust can provide a strong foundation for your family’s future financial security.


A living trust is easy to create


A living trust can be custom tailored to reflect your needs, wishes and level of personal involvement in managing daily affairs. It is also easy to establish. Have your lawyer review your plan and prepare your trust. Your living trust will likely be core to your immediate and future plans. You need to contact your lawyer and have the trust documents drawn with all the necessary provisions to ensure everything is done correctly. Then you will have to establish a clear set of objectives with an advisor that meet your needs and those of your family. You should also discuss and gain clarity about the benefits of having a professional trustee or successor trustee for your revocable trust. For that, you can discuss with your advisor.


There are many different kinds of trusts with unique features and benefits for each. Some of the common advantages of a trust include reduced estate taxes, allocation of assets into the rightful and desired heirs, avoiding court fees and probate, protection from creditors, or even protection of assets from family members (for conflicts or underage recipients). Actually, by establishing trust, you are protecting your hard-earned wealth and financial legacy. However, more importantly you have an organized and professional help to support your loved ones in a beneficial way even when you are not amongst them. Moreover, the assets within your trust may be able to get to the beneficiary faster than expected because most of the trusts help you avoid probate court.


Source:


https://www.rbcwm-usa.com/resources/file-687655.pdf

https://archive.lib.msu.edu/DMC/Ag.%20Ext.%202007-Chelsie/PDF/e1345rev1.pdf

https://www.dummies.com/personal-finance/estate-planning/what-is-a-living-trust/


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