A trust is a legal entity created by one party (Settlor) through which a second party (Trustee) holds and manages the trust’s assets for the benefit of a third party (Beneficiary). A “living” trust is created while the Settlor is still alive. Following its creation, the trust must be funded. Assets are transferred to the trust by checks, deeds, assignments, etc. You can serve in all three roles during your lifetime, if desired. The trust may be amended during your lifetime, but becomes irrevocable upon your death. The remaining trust assets are then held for the benefit of the named beneficiaries of your trust and distributed consistent with your instructions after your death.
It’s estimated that about 20% of people in the U.S. have established a living trust as part of their estate plan, and this number is expected to rise in the years to come. Why are living trusts so popular? Here are some of the many benefits of creating a living trust:
Probate is the legal process of settling an estate after someone’s death. It involves paying taxes, settling debts with creditors, re-titling assets and then distributing those assets to the beneficiaries. Probate is an expenseive, time-consuming, and frustrating process that can put additional stress on a grieving family. Fortunately, creating a living trust ensures your loved ones will never have to go through probate after your death. The trustee of your living trust has the authority to distribute your assets and settle your estate, so the court will not need to get involved. Many people choose to create a living trust solely to save their loved ones the headache of going through probate.
Reduces the Risk of Disputes
Loved ones have the right to challenge the validity of a will if they believe it was made at a time when the deceased was mentally incompetent. It’s also possible to challenge the validity of a living trust, but this does not happen very often. Why? People who create living trusts typically manage the trusts until their deaths. You can add more assets, name new beneficiaries, and make other adjustments throughout your lifetime. Staying actively involved with the trust shows that you were completely capable of managing your assets, so it’s hard for loved ones to prove incompetence.
Creating a living trust ensures your assets are distributed to the right beneficiaries. It also protects your loved ones from having to deal with the stress of a legal dispute over your estate.
Going through probate and dealing with disputes over your estate can cost your loved ones thousands of dollars. Since creating a living trust helps families avoid probate and heated disputes, it can also help them save money that would have otherwise been wasted in court.
Protection in the Event of Incapacitation
A living trust also provides protection in the event you are ever incapacitated. If this happens, the person named as the successor trustee can immediately step in and begin managing your assets without seeking the court’s approval. However, it’s not so easy for families in this situation if the incapacitated person has not created a living trust. In this scenario, the family would need to ask the court to appoint someone as a guardian or conservator of the incapacitated individual. Handling this complex legal matter is not something that any family member wants to deal with when their loved one is incapacitated, which is another reason why so many people are creating living trusts.
As you can see, there are many benefits to incorporating a living trust into your estate plan. It’s important to talk to an attorney to determine if it’s in your best interests to create this legal document.
If you’re ready to start the estate planning process, we invite you to discuss these issues with one of our experienced attorneys. As we learn more about your specific situation, we will be able to recommend the proper estate planning tools to prepare you and your family for the future. Contact The Nice Law Firm, LLP at 317-269-3500.