Approximately 60% of people die without having a will or other essential estate planning tools.
If you don’t want to leave your family with questions or problems when you die, you must work out your estate plans now.
One tool you might want to include in your estate plan is a living trust. Are you wondering what this is? Do you have questions about how does a living trust work?
If you have questions like these, you’re in the right place. Here is a guide that can help you understand what a living trust is and how it works.
What Is a Living Trust?
A living trust is an entity you create and manage while you are alive. The purpose of it is to protect the things you own by transferring the title of the items from your name to the living trust.
When you have a living trust, you can place anything you own in it. You can make changes to it at any time, too.
If you want to add additional things after creating it, you can add them. If you would like to remove things in it, you can remove them.
To better understand what a living trust is, you should learn the primary terms you will use with a living trust. Here are some of them:
- Grantor – The grantor is the person who creates the trust, owns it, and manages it. The grantor is the person who places assets in the trust.
- Trustee – The trustee is the person the grantor names to manage the trust after the grantor passes away. The grantor can choose a lawyer, relative, or friend to be the trustee.
- Beneficiaries – The grantor names the people who receive the assets upon death, and these individuals are the beneficiaries.
These are the essential terms to understand as you decide whether to create a living trust or not.
One key point to understand about living trusts is that they allow you to keep control over your assets while you are alive.
When you pass away, the control instantly goes to the trustee that you name in the trust. The trustee then has full control over your assets.
How Does a Living Trust Work?
When you decide to create a living trust, you must choose whether you want a revocable trust or an irrevocable trust.
A revocable trust is more popular, as it allows you to make changes to it while you are alive. An irrevocable trust is one that you cannot change, even if you are still alive.
Next, you will need to meet with an estate planning attorney to begin working on it. The attorney will set up the trust with you as the grantor. You can tell the lawyer who you would like to name as the trustee, and he or she will include it in the trust.
After you initially create it, you must decide what assets to put in the trust. You must change the name on the title of each asset from your name to the trust. Once you do this, the asset belongs to the trust.
Finally, you must name your beneficiaries. When doing this, you can set it up in several ways:
- You could specifically list each beneficiary along with the assets they would each receive.
- You could state that you want to divide all your assets by percentages to your beneficiaries.
Your lawyer can help you select the right choice for you and can explain other aspects that you should know.
What Benefits Does a Living Trust Offer?
Having a living trust provides a lot of outstanding benefits to you and your beneficiaries. Here are four of the top ones:
1. It Keeps Your Information Private
When a person without a trust dies and leaves assets to his or her heirs, the case may become public knowledge.
If this occurs, the assets you owned when you died will become visible to anyone who looks it up. The public would also be able to see who received your valuables. If you do not want everyone knowing your business, choose a living trust.
With a living trust, your information is sealed and protected. No one will know about it, except for those involved in your trust.
2. It Eases the Process of Transferring Assets After Death
With a living trust, the assets belong to the entity and not you. The benefit of this is that having a living trust speeds up the transfer process and simplifies it.
Your beneficiaries should be able to settle the matter quickly and not have to fight to take ownership rights of the assets you left them.
3. It Eliminates the Need for Probate Court
One of the reasons a living trust makes asset transfer easier is because it eliminates the need for probate court.
Probate court is something many families find themselves in after a loved one dies. Probate court gains the responsibilities of choosing where a person’s assets go after death when the person did not leave instructions.
If you have a trust, you have a plan in place for your assets, so your case will not land in probate.
4. It Reduces the Risk of People Contesting Your Wishes
The fourth benefit is that a trust is safe and secure. It is also something that courts respect and honor. When you have a trust, there is a meager chance that someone will contest it because of the way courts value trusts.
There are a variety of other benefits offered through living trusts, too. If you are not sure if this is the right option for you, ask a lawyer.
Estate planning lawyers can explain all the options you have, and they can help you select the choice that fits your needs the best.
How Can You Set One Up or Learn More About Them?
Do you feel that you may need a living trust? If so, contact us. We can answer the question “how does a living trust work?” in more detail for you if you have further questions.
We can also help you create a will and any other type of estate planning tool you may want to use. Call us today to learn more about the services we offer.