A living trust is a certain type of trust that is formed while its creator is still alive. In a living trust, the trust property (res) is transferred from the owner to a person who will hold the property (the “trustee”). The trustee will then transfer the property to its recipient according to the trust instructions. The recipient is known as the “beneficiary.”
Living trusts are generally less extensive than a will– they usually cover transfers of specific items of property, rather than a person’s whole estate. There are several advantages and disadvantages to using a living trust.
Living trusts have various pros and cons associated with them. Depending on your needs and desires, the characteristics of a living trust can either work for or against your situation. Some advantages of a living trust include:
- Avoiding Probate: Property that is transferred through a living trust will not have to go through the probate process upon the trust creator’s death. This can save much time, money and confusion regarding the property.
- Tax benefits: In some cases, working with a living trust can reduce the overall taxes associated with a person’s estate
- Privacy: Unlike wills, living trusts are generally not made public record
- Legal Protection: Having a living trust provides a written document that is enforceable through a court of law. If someone challenges the transfer, the trust documents provide records of your intentions. It’s generally more difficult to challenge a living trust than a will, since the person is still alive
Some disadvantages of living trusts include:
- Limited: A living trust may not cover the entire estate like a will might. Thus, the living trust documents need to be fairly specific when naming the property involved
- Power of Attorney needed: Even with a living trust, it may still be necessary to create a durable power of attorney. This is because a successor trustee may not have the authority to manage property outside the trust.
- Confusion: Having a living trust may create confusion, especially if terms in the trust conflict with other documents (such as other trusts or will documents)
As mentioned, each of these features of a living trust may work to your advantage, depending on your needs. For example, you might not want to cover your entire estate, especially if your estate is small and you only want to transfer a specific item of property. In such cases, the limitations associated with a living trust might actually work to your benefit.
Drafting and enforcing a living trust can be a complicated matter. If you need assistance with the transfer of your property, you may wish to hire an estate lawyer for assistance. An experienced attorney near you can help inform you as to whether a living trust is appropriate for your situation. Also, if any disputes arise, your lawyer can represent you during a lawsuit.