Should You Have A Living Trust?

People interested in planning their estate will hear about living trusts, and must decide whether to have one.  Here is information to help you decide if a trust is right for you.

First, it is important to understand what a trust is.  A trust is a legal arrangement where you transfer ownership of property to a trustee.  The trustee holds and manages the property for your benefit, or for other people you choose, called beneficiaries.  The trustee follows instructions you made when you set up the trust. 

A living trust means you set up the trust to take effect while you are alive.  This differs from a trust set up in your will which takes effect when you die.  That is a testamentary trust. 

There are many benefits to having a living trust in your estate plan:       

• If you become incapacitated, a living trust can help you avoid a guardianship (called “conservatorship” in some states).  A guardianship happens when a person is declared legally incompetent and a court appoints someone (a “guardian”) to manage that person’s money and make other decisions for him or her.  By having a living trust, you eliminate the need for guardianship proceedings if you become incapacitated, since you’ve already appointed someone to manage your money in this situation.

•  One of a living trust’s greatest benefits is avoiding the court probate procedure needed when a will is used to transfer property.  Your instructions in the trust tell the trustee what to do with your property when you die, so it partly replaces the need for a will.  This also saves some legal fees of the probate process.

•  Living trusts are harder to challenge than wills.  In a probate, your heirs receive notices asking if they want to challenge each action being taken.  Living trusts do not involve court filings or notices.

•  A living trust can transfer property faster than a will.  For a will, the court’s probate process takes months or even years.  How long is out of your control.

•  Your living trust can provide financial support for others, like children or grandchildren, without giving them control of property.

•  A living trust can be confidential.  In contrast, a court probate is a public record.

•  For large estates, a living trust can help reduce the taxes.

•  A living trust can help you with issues regarding young children.  If you die, a court appoints a guardian to manage money they inherit until they are adults. The guardian must get court approval for many decisions.  But a trust can state your choice who you want to manage the money, how to spend and save it, and when to turn it over to the children.

•  While you’re alive, you can be the trustee to manage the property you put in trust.

There are many reasons to have a living trust, but this does not make a living trust right for every situation.  A trust doesn’t totally eliminate the need for a will, particularly for assets you don’t put in the trust. Also, a living trust does not protect property from all creditors.  However, because there are so many benefits, you should consult with your lawyer on whether a living trust is right for you.