A living trust, or inter vivos trust, is a trust you set up while alive. It places your assets into a trust to be managed by a third party for your benefit. At your death, the assets are distributed to a chosen beneficiary.
In many states, the assets are transferred to the living trust beneficiary without going through probate at death. Living trusts can assist limit estate investigation by limiting taxable value and avoiding property loss due to a lack of knowledge about it being a part of a living trust. They allow for simple modifications if necessary, and they offer more control over who receives what when someone dies without a will.
- Avoid Probate in Multiple Jurisdictions
- Avoid Probate Entirely
- Avoid the Public Administering Your Estate
- Keep Your Affairs Private
- Avoid Out-of-State Taxes
- Limit Scrutiny of Your Estate
- Keep Assets from Getting Lost or Destroyed
- You Can Change the Terms of the Trust
- You Can Be the Trustee
- Greater Control of Your Assets
- Provide for Your Minor Children
1. Avoid Probate in Multiple Jurisdictions
If you own real estate, bank accounts, or other assets in different states, there is a possibility that one of them may become involved in the probate process when you die. This can be time-consuming and expensive for your beneficiaries to make sure it doesn’t happen; create living trusts in all of the states where you own property.
2. Avoid Probate Entirely
While alive, you can transfer ownership of your house into a living trust to avoid probate proceedings at your death. You could also transfer ownership of other assets like bank accounts, cars, and stocks; this would shorten the process for your beneficiaries and save them time and money.
This avoids the costly and time-consuming probate process. Even if you have a will, there can be a prolonged probate court process to establish if the will was properly executed and/or if the will is valid. A living trust provides continuity of ownership, like joint tenancy with the right of survivorship in real estate.
When you die, your living trust becomes a will, and a referral is made to the probate court with jurisdiction where you live. Probate is unnecessary if all of your assets are owned by the living trust (or transferred to it) during or after your lifetime. For most living trusts, a living trust lawyer is not required.
However, living trusts cannot avoid probate entirely. For example, the living trust must be admitted to probate whenever it comes time to transfer the title of real estate into the living trust’s name after your death (exception: if your living trust holds the title as tenancy by the entirety or joint tenancy).
It will likely end up in the courts if you die. If your living trust does not have a successor trustee designated, the court will appoint someone to manage it for you according to state law statute or judicial priority. It terminates upon the death of the last living trustee.
3. Avoid the Public Administering Your Estate
Every living trust must have a trustee who is in charge of managing your assets until your beneficiaries take over when you die. Many living trusts are set up with an individual or bank to serve as a trustee to avoid public probate proceedings.
They are private documents, unlike wills. No one needs to know you have a living trust unless you want them to know. You may keep living trust records in a safe deposit box along with your other legal or financial documents. A living trust doesn’t require probate court involvement after your death, keeping the process private.
They don’t require court supervision to distribute your assets at death, which is required in a will. If you have minor children when you create the living trust, the trustee must file an accounting in probate court for approval before distributing trusts to your children.
4. Keep Your Affairs Private
Trusts are beneficial in this regard because typically, there is no public record required in their formation. Note: this may vary from state to state and by the type of property in this trust.
The living trust is a private legal document, which means no one can access or review it but you and your beneficiaries. If you try to avoid probate through the process, state law requires that the contents of your living trust be disclosed in court; however, if you create one in all your states of residence, you can avoid this disclosure.
5. Avoid Out-of-State Taxes
If you own real estate in multiple states, they are a good way to prevent them from entangling with the probate process while living and after death. By living trust agreements, each state’s laws regarding the administration of estates do not have to be observed.
They are a great way to help protect your assets while alive and after you die by keeping them away from probate in multiple states. Creating one for all of the states where you own property can shorten the process for your beneficiaries and save them time and money.
6. Limit Scrutiny of Your Estate
Any estate worth more than a certain amount must be taxed, and they help to limit the value of your taxable estate. In other words, living trusts can help you keep more money from Uncle Sam in your pocket when you die.
You can control who receives your assets after you die. You choose the beneficiaries, who receive distributions from your living trust at your death. To avoid probate, if you have a large estate, it becomes more important to name a beneficiary for different portions of your estate (i.e., IRA, assets, savings account).
7. Keep Assets from Getting Lost or Destroyed
It is not uncommon for assets to end up in the wrong hands if there isn’t a living trust. For example, someone who is supposed to get your car may sell it or give it away if they don’t know you created one.
You can avoid this by having living trusts which include all your assets. If someone does get their hands on something they’re not supposed to have, they allow you to take it back by excluding the named beneficiary (the person who got it) from receiving what’s left of your living trust after you die.
8. You Can Change the Terms of the Trust
As the grantor of the revocable living trust, you can modify the terms at any time you wish. This may have some tax disadvantages for some, but for the vast majority of us, the $5,450,000.00 estate tax exemption will provide all of the estate tax help we will need.
9. You Can Be the Trustee
The trustee can be anyone you choose. You can make yourself the trustee for optimal flexibility, or you can name an attorney, financier, bank, trust officer, or someone else you have confidence in to manage the trust property for the benefit of you and your family, and you can change who you want the trustee to be at any time.
It is an effective estate planning tool and resource that you can use to manage your assets while living. For instance, you may designate a living trust as the location for keeping safe deposit boxes, insurance policies, stock certificates, and other valuables. You may also place property outside your living trust, such as property held in joint tenancy, pay-on-death accounts, and transfer-on-death accounts.
10. Greater Control of Your Assets
A living trust gives you extreme flexibility in distributing the trust property. You can create separate them within them to care for special needs relatives, minor children, educational needs, or charitable concerns.
You can disinherit spouses, children, or others as you see fit, and you can more effectively control property in another state without having to open ancillary probate proceedings to dispose of that property.
11. Provide for Your Minor Children or Other Dependents Living with You
Many are set up to provide for minor children or financially dependent family members living with you. A living trust may be a convenient way of keeping your assets out of their reach until they become adults and can handle them responsibly. If you have minor children living with you when you create one, the trustee must file an accounting in probate court for approval before distributing trusts to your children.
Bottom Line
Establishing one for all your assets is an important step in protecting your assets and making sure they go where you want them to after you die. It’s important to consider living trusts as a way to protect your assets and make sure they go where you want them after you die. A living trust is set up while alive, which places your assets into the hands of a third party for management during life.
The beneficiary receives the assets at death without going through probate in many states. Establishing one can help limit scrutiny on an estate by limiting taxable value and also helps keep from losing property due to lack of knowledge about it being part of a living trust. They allow for easy changes if needed and give greater control over who gets what when someone dies with no will.
Note: The information above should not be construed as specific legal advice. It is for informational purposes only, and you should address any specific questions towards an attorney in your area.