Not sure about the best way to manage your property? Have you considered a living trust? Our latest blog will tell you what they are, why you might need them and how to put your property in a living trust.
What is a living or revocable trust fund?
If you are thinking of estate planning, you are probably wondering what is a revocable living trust. A revocable living trust is simply a substitute for a will. It is written when one is alive with the aim of dividing property. A living trust is preferred to a will because of probate avoidance. An estate transferred through a revocable trust is exempt from probate. This means that the surviving family members are spared the time, money and effort spent on probate.
How do living trust funds work?
A living trust is a substitute for a will. How does a living trust work? Once the settlor dies, the trust becomes irrevocable. The property and other assets are transferred and held by the appointed trustee. The trustee then oversees the management and distribution of the property. The trustee is also tasked with taking inventory of the trust property and ensuring that all the named beneficiaries receive their portion as per the instructions of the settlor.
How to set up a living trust
Setting up a living trust requires a beneficiary, a trustee, and a settlor. The settlor is the individual who creates the living trust. The trustee is the party in charge of the trust assets. The beneficiary is the surviving estate who benefit from the living trust. A trust refers to the legal arrangement set up by these parties. In this cases, the settlor will transfer the assets to be managed by the trustee. The assets are inherited by the beneficiaries.
In a simple living trust arrangement, the trustee also serves as the grantor. This is the person who oversees and keeps control of the trust. A living trust is not cast in stone. The trust can be revoked. It is also possible to take out some property from the trust. The settlor can also name different beneficiaries.
Once the setup is completed, the details of the agreement are written down in a trust instrument. The trust document identifies the trustee, the settlor and the beneficiary. The list of items or property and their locations are included. The trust instrument also directs how the trust is to be managed and transferred.
Living trust or will
What’s the difference between a will and a living trust? Understanding the difference between a will and living trust helps you to make an informed decision. The major difference between a will and a living trust is probate. Probate refers to court supervision where the estate is passed onto the heirs through a legal process. A revocable trust does not need to go through probate. It is considered a private contract between the “grantor” and “trust-maker”. This means that the matters agreed are not subject to a public record. After the death of the settlor, a will becomes public. While court challenges to living trusts and wills are rare. It is more difficult to challenge a living trust compared to a will.
Do I need a living trust?
A living trust also helps you to plan for potential physical or mental incapacity. A living trust is also ideal if you have significant assets that require active management. You may wish to set certain conditions when leaving assets to your beneficiaries. You may not want to give them the assets as outright gifts. You can protect the interests of your surviving estate while ensuring that your assets and businesses are well managed. For instance, you can direct that the property is given to a beneficiary when they attain a particular age. The trust can also be designated for a particular use. A living trust is flexible, and it can be easily amended or revoked. If you wish to handle your estate matters privately and avoid probate, a revocable living trust is your best option.