Why Get a Living Trust?
A living trust is a legal arrangement designed to protect the financial interests of your estate and your beneficiaries. You may transfer real property, bank accounts, stocks or other financial instruments to the control of a trustee, who will manage these assets during your lifetime and beyond. While a living trust may not be right for everyone, it does offer certain advantages to those who choose to establish one.
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You Want to Avoid Probate
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One of the main reasons you might consider establishing a living trust is to avoid subjecting your estate and your beneficiaries to the probate process. Probate is a legal proceeding overseen by the state that begins following your death. If you die without a will, the state will appoint an executor who is responsible for inventorying the contents of your estate, paying any debts due and, finally, distributing your assets to your heirs according to state inheritance laws. A will allows you to specify the distribution of your assets but its contents become a part of the public record once your estate enters probate. With a living trust, any property held in the trust is exempt from the probate process. This means your beneficiaries receive their inheritance much more quickly and the contents of your estate remain private.
You Have Minor Beneficiaries
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If you have minor children, a living trust can ensure that their interests are protected should you die before they reach age 18. Typically, when there is no living trust the state will appoint a guardian to manage the assets of minor children until they reach adulthood. At this point, the assets become theirs. With a living trust, you can direct the trustee regarding when and how your children will receive their inheritance. For example, you may require your children to complete college or get married prior to inheriting. You may also specify whether they are to receive their inheritance in installments or in one lump sum.
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To Avoid Conservatorship
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A living trust can protect your assets and ensure that you and your family are provided for in the event you become incapacitated. If you do not have a living trust and you become permanently unable to manage your affairs, the state will appoint a guardian or conservator to do so. The conservator is bound to act in good faith but he likely will not be familiar with your specific wishes concerning your assets. Having a state-appointed conservator manage your affairs may also represent a compromise of your privacy standards. If you have a living trust, the trustee is able to continuously manage your estate without court supervision or intervention.
Considerations
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If you do not have any dependents and your estate is relatively small, you likely do not need a living trust. A qualified estate planning attorney can evaluate your financial situation to determine whether the costs of establishing and maintaining a trust are justifiable. Depending on your state of residence, a living trust does not necessarily reduce the amount of inheritance or estate taxes your beneficiaries may have to pay.
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References
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