A living trust is a strategy for estate planning that can assist you in avoiding probate and safeguarding the privacy of your family after your passing. But a living trust also comes with more paperwork and higher costs than a will, so it’s essential to consider your situation before you set one up.
A living trust may be a good choice if you have complex assets or your loved ones and live in multiple states. Some of the key advantages of using a living trust are as follows:
Control over your assets during your lifetime
What is a living trust? A trust allows you to control your assets during your lifetime while directing how you want them to be distributed after you die. It lets you name a trustee who will manage your assets and name beneficiaries who will receive the assets according to the terms of the trust.
A living trust can be an excellent option for people who want to avoid probate. It can also help you save money on taxes and protect your assets from creditors and a spouse’s debts.
Your revocable living trust can hold property, bank accounts, and investments. You can also transfer real estate, vehicles, and business holdings into a trust.
You can also put in a power of attorney for financial matters so that someone else can decide on your behalf. But a power of attorney isn’t as effective at protecting you if you become mentally incapacitated.
Moreover, a power of attorney will pass through probate and become part of the public record, making it more likely to be challenged and contested. A trust, however, is less likely to be examined and can remain private.
If you are still determining whether or not a trust is right for you, speak with an experienced lawyer. They can help you determine which type of trust best meets your needs and goals.
Avoiding probate
A revocable living trust is a legal arrangement that you can use to transfer assets during your lifetime and into the hands of your beneficiaries upon your death. It’s an excellent option for estate planning that can help you avoid the lengthy probate process and ensure that your assets are distributed as you want them to be.
During the probate process, the court oversees the distribution of your assets to your loved ones and can take up to several months to resolve. It can also burden beneficiaries and family members financially, so getting an estate plan to prevent probate from occurring is essential.
Other ways to avoid probate are joint accounts and titles, which allow married couples to own property together without going through the probate process. In addition, some states offer tenancy in common or tenancy by the entirety for real estate to avoid probate.
While these procedures are helpful, they can also be complicated and expensive. Moreover, these methods can cause problems when the properties are owned in different states.
Working with an experienced attorney to develop a plan to protect your property and your family from unnecessary costs and delays is essential. A well-crafted living trust can also ensure that your heirs receive the assets you wish them to have after your death, and it can also help you save on estate taxes.
Tax-saving opportunities
A living trust allows you to establish a legal entity that owns assets. It can be helpful for tax-saving opportunities, like avoiding high state and estate taxes. It may also help keep your wealth in the family during your lifetime and after your death.
Creating a living trust can require time and money, but it could be worth it. It can avoid probate costs and save your loved one’s time and effort regarding asset distribution after you die.
Probate fees can be significant, particularly if you own property in another state. Those expenses could be avoided by setting up a living trust to pass your property directly to your beneficiaries without going through the probate process.
A living trust can also save you time and money if someone contests your distribution plan because it tends to hold up better than a will in those situations. It also allows you to distribute your property more quickly, saving your heirs from waiting months or years before receiving their inheritance.
You can amend the document anytime to make your trust more flexible. It can be beneficial if your life changes – for instance, you have a child or acquire new possessions.
Asset protection
A living trust is a fantastic approach to safeguarding your possessions while alive. In many cases, it can also avoid probate when properly structured and drafted by a lawyer.
A living trust’s most apparent asset protection benefit is that it can be used to protect assets from creditors or lawsuits. It can include real estate, cash, stocks, and even cryptocurrency.
However, the most effective way to protect your wealth is through a domestic asset protection trust (DAPT). These specialized trusts offer the most potent form of creditor protection available in the law.
Depending on the protected asset type, they are typically set up as self-settled or third-party trusts. They can be set up for children until they reach a certain age, or they can be set up for adult beneficiaries.
These trusts also provide financial support for people with special needs, such as disabled dependents. It can help to ensure that a beneficiary does not lose eligibility for government benefits, such as Medicaid when they become disabled.
These are just a few of the most common uses for asset protection trusts. Still, it is essential to understand all their benefits and risks before deciding whether a DAPT suits your situation. An experienced attorney can assist you with determining which asset protection trust is best for your circumstances and goals.
