Benefits of Creating a Living Trust
A living trust can be defined as the process of managing one’s financial assets for one’s current and future enjoyment. This is different than a standard trust, which holds property aside for a future beneficiary. Living trusts allow both the trustee and the beneficiary to profit from the ongoing hands-on management of the trustee. Living trusts have numerous benefits but are still underutilized by most people, who wrongly believe that only the wealthy need them. Anyone with property to pass on should have a living trust.
- Avoiding probate. The primary reason for a living trust is avoidance of probate. A traditional will takes effect upon the death of the estate holder and can take months to years to pass through the courts. A living trust allows assets to pass to the successor beneficiary almost immediately upon the death of the primary beneficiary, within a few weeks at most. Even if all that is being transferred is a home or a bank account, avoiding this delay can be essential.
- Saving time and money. Although the initial creation of a living trust may involve more cost, because all properties must be transferred into the trust (real property, 401(k) plans, title deeds), it saves time and money upon the death of the primary trustee, because there are no probate costs. Nor are there issues involving access to assets—the trust is funded and properties and money are available.
- Avoiding conflict. Everyone has heard horror stories of court battles over wills which begin almost before the loved one is on the ground. Living trusts help avoid contested wills by avoiding probate—all dispositions are clearly laid out in the trust and instructions given to the trustee long before the event. Living trusts ensure that all property is accounted for and assigned; that is the purpose of the trust.
- With the inclusion of a durable power of attorney, the successor trustee or another appointed individual can take over management of the trust in the event the primary trustee is incapacitated for some reason. With people living longer, and Alzheimer’s and dementia becoming increasing concerns, this can be a relief to many individuals worried about the final disposition of their properties.
Not everyone needs a living trust. Those with no property to pass along, or without living relatives, may not need one. Consultation with legal professionals is important to assess which type of documents are necessary for your situation.