4 Crucial Things To Know About Living Trusts
You may know all about the importance of leaving a will behind for your loved ones -- but have you thought about a living trust? These legal instruments, which transfer your assets to a separate trust under the control of a designated trustee, can help your beneficiaries escape the lengthy, frustrating process of probate. Here are four concepts you should come to grips with as you take this type of estate management under consideration.
- The Difference Between a Living Trust and a Will - You may wonder why or whether you should consider a living trust when you already have a final will and testament, or vice versa. But while both instruments can enable you to leave property to your children, each instrument also provides several significant benefits that the other does not. For instance, wills permit you to state your preferences regarding child guardianships and property management, as well as instructions on how to pay taxes and other obligations after your death -- none of which falls under the range of a living trust's offerings. But unlike a will, a living trust doesn't require beneficiaries to go through the probate process; they can also remain private after your death.
- Revocable vs. Irrevocable Trusts - Living trusts come in revocable and irrevocable forms. Revocable living trusts can be revoked, altered, or cancelled at any time before your death. In the case or an irrevocable living trust, however, whatever assets you assign to the trust stay there forever and cannot be changed in any way. A revocable living trust can make good sense if you have a relatively small net worth and/or expect that you will want to make changes to its assets in the near future. On the other hand, an irrevocable trust can lower your liability for estate and capital gains taxes by permanently shifting taxable assets from your estate to the trust.
- What You Can Include in a Living Trust - While every state may have different guidelines as to exactly what assets you can find your living trust with, most individuals can include items such as investment accounts, bank/commercial accounts, real estate, and insurance policies. But the fact that you can include certain assets in your trust doesn't necessarily mean that you should do so. For example, transferring a vehicle into a revocable living trust may result in your being slapped with a sizable title transfer tax.
- The Need to Fund Your Living Trust - Setting up a living trust is only the first step toward securing the proper disposition of your estate -- you must also remember to fund that new living trust with the assets you want it to include. You may find it all too easy to put this task off while you're young and healthy, but a sudden tragedy could render your underfunded trust all but worthless to your surviving loved ones.
Talk your family law attorney or contact a firm, like Granowitz, White & Weber Attorneys at Law, about the details of setting up and funding the right kind of living trust for your needs. You'll rest a lot easier knowing that you've built the foundation for a less-stressful transfer of your estate to those important people in your life.