A living trust is a valuable tool that allows for flexibility and control over your assets while creating a secure plan for passing your property to beneficiaries. While the reasons for creating a living trust can be numerous, many people create a revocable living trust for the following benefits:
- A living trust avoids probate
- It prevents a court from controlling your assets if you become incapacitated
- It can be changed or revoked at any time
- It can designate when a beneficiary obtains an asset
A revocable living trust involves three parties: the creator of the trust (often called the “grantor”), the trustee(s) who manage the trust, and the beneficiaries of the trust. You are free to name yourself as the trustee while you are alive and appoint a successor trustee to administer the trust upon your death.
Another benefit to a revocable living trust is that the trustee can begin managing your financial affairs in the event you are incapacitated. Without a trust, a court would have to appoint a guardian to manage your finances.
One big advantage of a living trust is that the trustee can distribute assets in the trust according to the grantor’s discretion, even after death. For example, a grantor can specify that no assets are to be distributed to his or her children until they graduate from college.
A trust may also bring tax benefits. The Internal Revenue Service taxes lifetime gifts and inheritances when those gifts and inheritances exceed a certain amount. The tax implications of a trust can be complicated, but gifts between spouses are normally exempt, for example. As long as both spouses are still living and competent, a properly drafted trust may shelter some assets from taxation.
If you would like to create a living trust or have questions regarding whether a living trust is right for you, contact an experienced estate planning attorney to ensure that you provide for your loved ones as well as possible in the event of incapacity or death.