Many individuals make an estate plan during their lifetime to control how their assets should be handled and disseminated upon death. The purpose is to eliminate uncertainty and conflicts. Estate plans typically include wills and trusts, subject to many different laws. These laws will differ between the states.
A living trust is a prevalent option for individuals to possess in their estate plan. Before making a living trust, you should become familiarized with the basics and general process. Below are some frequently asked questions about living trusts.
What Is a Living Trust?
A living trust is one that someone assembles while alive appointing a trustee to oversee their assets. It is a legally binding document. The trustee will allocate your assets according to the intentions laid out in the trust upon your death. Common assets to keep in a living trust include real estate, valuable art, and bonds.
What Are the Main Advantages of Assembling a Living Trust?
The number one reason people create living trusts is to bypass probate, which is often expensive and time-consuming. Assets named in a living trust will not need to pass through probate, and the trustee can disseminate them to the beneficiaries upon the estate holder’s death.
Another significant benefit of making a living trust is evading estate taxes, which can add up fast depending on the person’s estate plan.
What Is the Procedure for Making a Living Trust?
Your state laws will dictate how to form a living trust specifically. However, you will generally need to sign the written trust document and get it notarized to make it legally binding. The designated trustee will also need to sign the document.
Keep in mind that the estate holder can name themselves as the trustee, which often happens. This would permit the estate holder to own and oversee the assets. Maintaining control over their property is crucial for choosing to do this.
Is a Living Trust Different from a Will?
Yes, a living trust is different from a will, even though their operation is very comparable. For instance, the property in a will does not pass to beneficiaries until the estate holder dies. The types of assets included in living trusts and wills may also coincide.
The most significant difference between a living trust and a will is that a living trust can avoid probate. Instead, the trustee will disperse the estate holder’s property according to the terms of the trust. No court intervention is required.
On the other hand, a will needs to pass through probate and involve court intervention. This will often slow the property distribution and is more expensive.
Who Would Not Profit From a Living Trust?
Living trusts typically benefit people with many assets, particularly when they are valuable. Other categories of people will not benefit from creating a living trust. This typically includes the following:
- Young married couples without a lot of assets or children. This is especially true in community property states.
- Individuals who do not own many assets or whose assets are of low value.
- Estranged families where it is clear there will be conflicts down the road requiring court intervention. This overthrows the goal of a living trust, which is to bypass court intervention via probate proceedings.
Are There Other Recourses to Probate Besides a Living Trust?
Making a living trust is an optimal choice for bypassing probate. However, another standard option is placing property in joint ownership with the person you want to leave the property. This is a typical move to make with real estate.
Do I Still Need a Will If I Make a Living Trust?
It is still a fine idea to have a will, even if you have a living trust. They are different instruments, even if the assets included in both overlaps. There will still be other assets in a will if this is the case. For example, a will almost always consists of a residual estate, a catch-all for any assets you do not specifically name under the will.
A will can also include any assets you did not want, such as things that can benefit from passing through probate. It can also include holdings of lower value that you still want to give to a specific individual because they have sentimental value.
Can I Move Property To Living Trust While Alive?
Yes, you will have the flexibility to transfer new property into the living trust while you are alive. You can also transfer property out of the trust during your lifetime. There is no restriction on these actions.
You can also void your living trust without needing to have anyone else’s approval. However, one exception is if you created the trust with another person (like a spouse). You may need to get their consent to revoke the trust in this instance.
Is it Expensive to Create a Living Trust?
A basic living trust isn’t much more complex than a will. With a good self-help book or software program, you can make a valid Declaration of Trust (the record that forms a trust) yourself. If you run into questions that a self-help publication doesn’t answer, you may need to consult a lawyer, but you probably won’t need to turn the whole job over to an expensive expert. You can make a living trust.
Creating a living trust work for you does demand some important paperwork. For instance, if you want to leave your home through the trust, you must sign a new deed, indicating that you now own the home as trustee of your living trust. This paperwork can be tiresome, but the annoyances are fewer these days because living trusts have become so typical.
Is a Living Trust Record Ever Made Public, Like a Will?
No. When submitted to a probate court, a will becomes a matter of public record, as do all the other records associated with probate—inventories of the deceased person’s assets and debts, for example. However, the terms of a living trust need not be made public.
The significant benefit to creating a living trust is that property left through the trust doesn’t have to go through probate court. In a nutshell, probate is the court-supervised process of settling your debts and allocating your property to the individuals who inherit it.
The average probate carries on for months before the inheritors get anything. And by that time, there’s less for them to get: In many circumstances, about 5% of the property has been consumed up by an attorney and court fees.
Still, not everyone has to stress about probate, and some individuals don’t need a living trust at all.
Do I Need to Hire a Lawyer to Create a Living Trust?
Creating a living trust is usually not complicated. However, it takes a lot of reflection. A local living trust lawyer can help you put things into perspective and determine which assets would be best suited to go into a living trust and which should pass through probate.
A lawyer can also draft your living trust, amend your living trust, and represent you in court if any issues arise. Use LegalMatch to find the right lawyer for your needs.