Why Do You Need a Living Trust?

There’s still a misconception that estate planning is something that only benefits the wealthy. To the contrary, there are several ways a lawyer can help you determine how your assets will be distributed and who will care for your children after your death. While a will is essential for establishing guardianship of your minor children, a living trust helps you maintain tighter control over how your assets are distributed. The following overview provides a better understanding of a living trust and demonstrates why you should consider implementing one as a part of a comprehensive estate plan.

What is a Living Trust?

A living trust is a document that allows you to manage certain assets and use them throughout your lifetime. Upon your death, those assets are transferred to the beneficiaries you name in the trust. Since this transfer is automatic and the living trust is a private document, the assets contained within it don’t go through the probate process. This ensures your beneficiaries will receive the assets you intend for them and also eliminates the delay that the probate process creates.

You can create a revocable or irrevocable trust, depending on your circumstances. A revocable trust is more common, because it allows the trustee to alter the terms of the trust. This will be beneficial if you include assets you will want to use, such as funds in a retirement account, up until your death. It also allows you to add to the assets included in the trust. Conversely, an irrevocable trust cannot be changed once it has been drafted and signed. Assets included in an irrevocable trust can only be used in accordance with the terms of the trust.

How Can You Use a Living Trust?

Limit Assets Going Through Probate

Since a living trust is a private document, the assets contained within it won’t be liquidated to pay estate taxes and debt claims made against the estate. This will help you save more of your assets for your beneficiaries.

Ensure Specific Assets Go to Your Beneficiaries

You may have assets that hold sentimental value, or are intended to go to a specific beneficiary. By including these assets in your living trust, you can ensure they’re not liquidated and will be distributed to the beneficiaries you choose.

Leave Money to Minor Children

If you have minor children, they may be too young to responsibly manage the assets you want to leave for them. The trust can be used to hold those assets in a protected account until your children reach an age you specify.

Protect Yourself With a Trust

Another important benefit that a trust provides is to establish a trustee to help you manage your assets in the future. If an illness, or injury, incapacitates you, the succeeding trustee you choose will step in and manage the trust for you. This can involve using funds in the trust to pay for your medical care and protecting assets from being exploited by those you wouldn’t have trusted.

The rules governing living trusts differ state by state, so you should consult an attorney when you’re ready to draw up a trust. A lawyer who is experienced in estate planning can explain how you can use a living trust and the benefits that it will provide for you. Overall, a living trust can be used to give you better control over your assets while you’re alive and help you determine how they will be distributed upon your passing.