A common substitution for creating a will is the living trust. It is created by a person while they are alive, and use it to leave property to others upon their death. Here is what you need to know about living trusts to determine if they are best for you.
Advantages of Living Trusts
A big benefit of living trusts is how they will help the recipients of the trust avoid the probate process. It saves those people money, effort, and time spent going through a process that is unnecessary if a proper estate plan is in place.
Living trusts are also completely private, and can go into effect while the settler is still alive if they were to become incapacitated and require help managing the trust. In comparison, a will becomes public record after it is filed, offering no privacy at all.
Setting Up Living Trusts
Living trusts have 3 rolls that must be filled to properly set one up, with the trust being the legal agreement that they enter.
- Settlor – Person who creates the living trust
- Trustee – Person who manages the living trust assets after the settlor's death
- Beneficiary – Person or people who receive the benefits of living trusts
In basic living trusts, the settlor can also be the trustee at first. It gives the settlor the ability to change the trust at any time, transfer items, take items out, completely revoke it, and assign new beneficiaries.
The document where a living trust is recorded is known as the trust instrument. It will identify all three roles, lists items in the trust, how to manage those items, and when and how they are distributed to beneficiaries. A successor trustee is also named when the original trustee is also the settlor.
Executing Living Trusts
The living trust will become irrevocable once the settlor passes away. This means that there is no way that the living trust can be changed. The trustee is responsible for carrying out the terms of the living trust. This includes collecting property and distributing them to beneficiaries.
Since the trustee is controlling the collection and distribution of property, it can take a couple weeks or months to execute all of the tasks they are responsible for. In comparison, the probate process can take as long as 1-3 years in some states.
If a living trust sounds like an ideal form of estate planning for you, work with a lawyer who can walk you through the process of drafting the documents for it.
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