Frequently Asked Questions
Frequently Asked Questions About Living Trusts
In the sections that follow, we will address some of the most common questions that people like you have about living trusts and how We The People can help.
What Is a Living Trust?
A living trust is a legal document that you create before your death to specify what your wishes are regarding assets, heirs, and beneficiaries. This document only goes into effect upon your death, and it gives power to a successor trustee to carry out your wishes at that time.
It is called a “living” trust because it is made while you are still alive and not created at the time of your death. With a living trust, you can remain the trustee of your own trust and keep full control of your assets while you are alive. However, you can also designate that someone else be the trustee of your living trust and maintain control of your assets for you.
Who Needs a Living Trust?
A wide variety of people can benefit from having a living trust, but it is more practical for some individuals than others. For example, you may want to set up a living trust if you have substantial assets, various business interests, property ownership in multiple locations, or complicated family circumstances. Living trusts are also excellent options for individuals who are single and unmarried because there would be no spouse to handle financial matters after death. People with large estates or that do not expect to live for many more years often benefit from living trusts.
Where to Get a Living Trust?
Estate planning attorneys are in the business of establishing living trusts for their clients and experienced in all of the processes involved. However, you don’t need an attorney and can consult an experienced legal documentation preparation service like We The People. Depending on how you establish your living trust, the average cost from start to finish is between $250 and $3,000. But without a living trust, it is likely that the probate process will extend for many months and that a significant percentage of the total assets will go towards court and attorney fees.
What Is a Revocable Trust?
There are two basic types of living trusts, revocable and irrevocable. A revocable living trust allows you to transfer assets into the trust, but you are the trustee who has control of those assets. You have the option of revoking, or changing the trust whenever you like. Upon your death, these assets are transferred to your beneficiaries through the trust. This is the most common type of living trust.
On the other hand, an irrevocable trust enables individuals to give away the entirety of their assets during their lifetime. This is a permanent decision that cannot be revoked. Also, this is an option best pursued if you have more assets that you would ever use in your lifetime. The benefit of an irrevocable trust is that these assets aren’t taxable as part of your estate, meaning that your beneficiaries would receive more of your money.
What Assets to Put in a Living Trust?
This is a good question and one that is largely dependent upon your financial situation, what you own, and who you want to have your assets after death. Real property is the most common asset to put into a living trust, although this does take some paperwork to set up. Leaving a house to your beneficiaries through a trust involves signing a new deed that indicates that the house is now part of the trust, for example. In general, it is advised that you put all or most of your assets into your trust, although you may want to leave something out if could cause a possible lawsuit or if you have another good reason. Other assets to possibly add include bank savings accounts, business interests, investments, life insurance and oil and gas interests.
How Does a Living Trust Work?
By completing the necessary legal paperwork, a legal trust allows you to transfer property without going through probate. You will need to appoint a successor trustee to handle trust-related matters in this document. This successor trustee is responsible for transferring ownership of your assets to your beneficiaries after your death.
Living trusts are attractive to many people because this transfer process often times only takes a few weeks to complete and does not typically require additional court or attorney fees. Unlike a will, living trusts are not entered into public records and can be beneficial in securing your wishes privately. The living trust will no longer exist once all of the assets it contains are transferred to your beneficiaries.
What Is a Living Trust Used For?
Living trusts are most commonly used to avoid probate and ensure that a person’s wishes are fully carried out after death. However, they are not effective in reducing estate taxes at the state or federal levels. Living trusts are also not used to protect property that you own from creditors because creditors can pursue the trust property in the same way that they would have when you were still alive. To use your trust in the way it was intended, you must transfer each and every asset you choose into it, which involves changing the titles of assets out of your individual name and changing beneficiary designations.
What Are the Advantages of a Living Trust?
There are many advantages of having a living trust, and the most common one is avoiding the expensive and time-consuming probate process. This process can be a huge burden for the family members that you leave behind after your death, so having a living trust is an effective way to make this time a little easier on the ones you love.
Living trusts can also provide protection in the event that a lawsuit is filed to challenge your will. This is because the process of transferring assets can serve as evidence that you were competent to manage your finances and make informed decisions about your affairs.
Who Should Have a Trust Instead of a Will?
There are no circumstances in which it is advisable to have a trust instead of a will.
A will is necessary as a “backup” for any assets that you don’t have in your trust. If a person forgets to transfer ownership of one particular piece of property or asset to the trust, it will not be part of the trust transfer upon death. But if this person had a will in place, this legal document can provide guidance about where that property or asset should go to. Otherwise, the state’s laws may not distribute assets in the way that you would have wanted.
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