There are a myriad of factors to consider when creating an estate plan. In addition to organizing your property and assets, you must consider who you would like to receive it once you pass. Furthermore, you may want to make the process as easy as possible for your loved ones.
A living trust is an essential component to an estate plan, as it offers several advantages to those who wish to organize their estate, beneficiaries and assets.
What is a living trust and how does it work?
A living trust is an entity that manages your assets and property for you, while you are living and once you pass. According to The Balance, the trustee manages your property and assets once you transfer ownership of your property and assets into the trust.
In a revocable trust, you stay in charge of those assets while you are alive. You can rearrange assets, change beneficiaries or redistribute property as you see fit. In an irrevocable trust, however, an appointed trustee manages your property, as you essentially transfer complete ownership over to the trust.
What are the benefits of a trust?
Unlike a last will and testament, living trusts do not have to go through the probate process. The probate process, which establishes validity and determines taxes, is not necessary as you relinquish ownership of the items once placed in the trust.
Other benefits of a living trust include the following:
- Property and assets transfer directly to beneficiaries
- Property and assets can stay in the family and do not run the risk of ending up with a beneficiary’s spouse or someone you did not intend to have your property
- Privacy, as trusts are not a matter of public record
You can also organize your trust in a way where assets are paid out over a period of time or once a milestone is reached. For example, a child may receive their share once they become a certain age. You can also allocate the money to help a child pay for college.