Why Living Trust Forms are Important for Anyone
Living trusts aren't just for the rich. A living trust is an important estate planning tool that can be used for asset protection, privacy, avoiding probate, and more. If you don't know whether to make a living trust or have asked yourself "what is living trust", we'll explain some of the important benefits that can be reaped by their use.
A living trust fund is created by a document that names the trust, its purposes, identifies a trustee to manage the assets on behalf of the beneficiaries, and describes the trustee’s authority. Then assets are identified to be placed in trust, which is called funding the trust.
The creator of the trust is also called the settlor or grantor, and may also be named as both a trustee and beneficiary. The extent of the grantor’s powers over the trust will determine whether it is a revocable living trust or an irrevocable trust. The reason why living trust documents are often created as an irrevocable trust is because the lack of the grantor’s power over the assets makes it harder for creditors to attach the assets than those placed in a revocable living trust. That’s why a trust fund is considered to be an asset protection vehicle.
The terms living trust vs will are often misunderstood. There are important differences when comparing a will vs living trust. A last will takes effect only after you die and distributes all the named property to beneficiaries upon your death. Living trusts take effect before your death and can allow the property to be distributed or managed according to your instructions, even after your death. Another difference between these estate planning tools is that a last will becomes a public document when it filed as part of the probate process. Living trusts aren’t typically required to go through probate or be filed, so therefore, the property they contain and the parties involved can remain private. If you own real estate in more than one state, living trusts can also avoid having to undergo multiple probate procedures in different states.
Why Living Trust Forms Aren't Just for the Rich
A trust is a legal entity which holds assets titled in the trust’s name, managed by the person named as trustee, according to instructions in the living trust forms. They are an important estate planning tool. A living trust fund can provide benefits regardless of whether you’re wealthy or not. We’ll examine some of the important benefits the decision to make a living trust can offer.
Avoiding probate – If you’d like to prevent your affairs from being a matter of public record during the probate process, living trust forms don’t go through probate like a will does, so the property in trust can stay confidential. Living trusts offer a level of privacy that isn’t available to assets distributed through a last will. However, if you desire court supervision in administering your estate, then a will vs living trust may be preferable.
Incapacity – If you become incapacitated due to an illness or accident, living trusts can save you from the expense and delay of having a guardianship or conservatorship created to manage your assets. The trustee appointed in your living trust can manage the property or business according to your instructions in trust documents.
Asset protection – An irrevocable trust can offer more protection against creditors reaching assets than a revocable living trust. Because of the assets being owned in the name of the irrevocable trust and the lack of control retained over the assets, it makes it harder for creditors to claim the property in trust as being owned by you to pay your individual debts.
Control after death – A living trust can remain in effect after you die, managed and distributed according to your instructions to your trustee. That is another difference between a living trust vs will. With a will, once you die, the assets are distributed outright and you have no say in how the assets are handled after you die.
Have you been wondering “what is a living trust used for?” You don’t need a large estate to be benefited by creating living trusts. There are various important reasons to make a living trust. We will take a look at some of the reasons below.
1. You want to protect your privacy. – One of the main differences between a living trust vs will is that a last will becomes a public document in the probate process, whereas a living trust is not a matter of public record, and generally not required to be filed in court. If you have assets that you don’t want to have identified under your name, putting the assets in a trust fund, as owned under the trust fund name, gives you an extra layer of privacy.
2. Avoiding probate. – The probate process can be rather involved in some states and having the assets in trust can let you avoid the probate process. Especially if you own property in more than one state, living trusts can avoid having multiple probate procedures to deal with. When you have assets distributed through a last will vs living trust, your estate could be required to go through probate in each state where property is owned.
3. Maintaining control of assets after death. – Another reason why living trusts can be beneficial is that the assets can be managed after your death, rather than being distributed outright when you die. This allows you to retain control over the use of the assets after you die. Your appointed trustee can manage trust assets for you, according to your instructions in the trust document.
4. Asset protection. – An irrevocable trust can protect the assets it contains from being attached by creditors of its creator, also called the grantor or settlor. When the creator of an irrevocable living trust fund doesn’t retain rights to control the trust fund, it can protect the assets from the reach of creditors. This is true even when the grantor receives distributions from the irrevocable trust. However, a revocable living trust often is considered property of the grantor and able to be reached by creditors.
