The Meaning of "Living Trust"
Failure to engage in estate planning can leave your assets in the hands of the wrong beneficiaries when you die. If you want control over what happens your assets after you're gone, the living trust is a type of estate planning tool that you may want to consider using.
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Living Trust Basics
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A living trust involves three parties. The creator of the trust puts their assets in the care of a trustee. The trustee watches over the assets until the appropriate time. Then the assets are transferred from the trustee to the beneficiary of the trust. With this type of arrangement, you actually transfer legal ownership of the assets to the trust and then the ownership of the assets is later transferred to the beneficiary.
Avoiding Probate
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One of the primary reasons that people use living trust is so that they can avoid probate. When an individual dies without a trust, his assets will go through the probate court before they are distributed to the appropriate beneficiaries. This process can take some time and it can be a strain on the beneficiaries. When a trust is used, your assets do not have to become public knowledge as they would if they passed through the probate court.
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Using the Assets
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When you set up a trust, you do not necessarily have to lose access to the assets in it. Even though the assets are technically owned by the trust, you can still gain access to them as the creator of the trust. This gives you the right to fully use the assets while you are still alive.
Creating the Trust
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The process of creating a trust will take some time, but it is typically not complicated. You can set up a trust with the help of an estate-planning attorney or with a trustee like a bank. Once you set up a living trust, you will then have to go through the process of transferring all of your assets into the ownership of the trust. For example, with real estate, you would have to change the name on the deed to the property.
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