If you have never heard of a living trust, now is a great time to learn. A useful estate planning tool, a living trust is, aside from a Last Will and Testament, one of the most commonly used mechanisms for transferring assets to your family and loved ones upon your passing away. For a full picture of a living trust, we are going to take a look at the upsides and downsides of a living trust.
Exploring the Upsides and Downsides of a Living Trust
In establishing a living trust, the trustor, the creator of the trust, will transfer assets to be held in the trust. This is done by transferring ownership of the asset into the trust’s name. A trustee will be appointed to manage the trust for the benefit of the trust beneficiaries. Upon the death of the trustor, trust assets are transferred to the beneficiaries according to the terms set forth in the governing trust document.
Why would someone use a living trust? One of the biggest upsides of using a living trust as a means of transferring your assets after your death instead of using a will is the fact that it avoids probate court. Probate is expensive. Probate can take a long time to complete and, all the while, your beneficiaries will have to wait until the end of probate proceedings before receiving any of their inheritance. Probate is also public whereas a living trust will transfer property in a private manner.
A living trust also allows a certain level of control over the assets you are transferring to your family after you pass away. Through the terms set forth in the trust document, you can do things such as delay distributions until your children have enrolled in college. You can condition distributions so that they are only used to pay for things such as educational expenses. You can pace distributions over a period of time so that they are not quickly spent away as is always a risk with a lump sum inheritance.
Another upside of a living trust is the fact that it is much more difficult to challenge a trust as opposed to a will in court. Reducing the possibility of a court battle after you pass away can help bring you peace of mind that things might remain more amicable between your heirs. Hotly contested will battles have been known to drive deep wedges between family members and loved ones.
A trust is more difficult to challenge, for starters, because it is more difficult to prove that the trustor was incompetent than it would be to prove a testator of a will was incompetent. A will is put in place and, while it may be updated throughout a person’s life, it is not actively managed during a person’s lifetime as a living trust is. Furthermore, there are likely to be less people who will challenge a trust as opposed to a will. This is because only the named beneficiaries of the trust have a right to see the trust’s contents. With a will, all named beneficiaries as well as the heirs at law must be provided with notice of the will and the contents of the will.
While a living trust may have its disadvantages, they are negligible in light of its many benefits. For instance, a living trust will likely involve more paperwork. There are some logistical hoops to jump through, such as transferring ownership of assets into the trust. Furthermore, you will need to keep written records relating to the transfer of property in or out of the trust. Once you have transferred property into the trust, however, further transfers are often rare.
Estate Planning Attorney
To learn more about living trusts and other valuable estate planning tools, talk to the team at Verras Law. Contact Verras Law today.