Benefits of Living Trusts
A living trust is a legal document that allows you to place your assets in a trust and administer them to your benefit while you're living, and it transfers your assets to your chosen beneficiaries upon your death. You select a successor trustee that handles your financial affairs during extreme illness or death. It is common that your beneficiary and trustee are the same person. Married couples typically choose their spouses as the trustee. Although assets are no longer in your name after creating a living trust, you are still in control of the trust and the assets.
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Avoid Probate
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Probate is the process of taking a person's will to the local probate court, having the assets appraised, paying off all debts, and dividing the remaining assets. This process is lengthy and often costly. A living trust that avoids probate is called a revocable living trust. To create a revocable living trust, you must sign a document called a Declaration of Trust. Avoiding probate means your assets are divided quickly and distributed to your beneficiaries. Your successor is responsible for paying off your debts and distributing the assets.
Possibly Save Money
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Depending on your financial situation, a living trust may save you money in the long term. Initially the costs to draft a living trust are higher than a will, because the legal document is complex. The savings come at the time of your death when your assets are distributed. You will avoid probate and court costs. In the event the distribution of your living trust is contested, it will likely hold up in court more than a will. It is possible that a living trust may save married couples money because they can file a joint living trust.
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Appoint Overseer
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If you're ever ill or incapacitated, the trustee of your living trust can now make decisions on your behalf. However, in the case of a will that does not have a durable power of attorney, the court appoints a person to oversee your financial situation. The court-appointed person has to receive permission from the court to pay for expenses and sell property. A living trust allows you to personally select the successor trustee that you want to take over in the case of your illness. The successor trustee is revocable, meaning you can retain control over your living trust if you disagree with your incapacity.
Offers Privacy
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One of the key benefits of a living trust is that it offers you privacy. Unlike a will, a living trust does not become a public document upon your death. All distributions are made in private. Keeping your financial assets private prevents creditors from filing a claim against your assets. If the creditors are legitimate, a living trust gives your trustee the advantage when negotiating with creditors.
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