A living trust is a legal document. It is slightly different than a will because it establishes a trust for any of the assets you have that you wish to have transferred into it. Many people choose to create a living trust, so the transfer of their assets is overseen by a trusted person after their death. You may have heard a living trust referred to as a revocable trust or revocable living trust.
When you create a living trust, you are automatically the grantor of the trust. Anyone you designate as a distributor of your assets is known as the successor trustee. Since this is a revocable trust, you still retain control of any assets you have placed within the trust. Therefore, you can still take out a mortgage or refinance a home or other property.
You also retain the right to sell or even give away any assets that are listed within your living trust. And at any time, you may remove specific assets from your revocable living trust or change your successor trustee.
Benefits of Utilizing a Living Trust
There are multiple benefits of utilizing a living trust. The major benefits include:
Creating an Option if You Happen to Be Unable to Make Decisions
If you have an accident, or you get ill, you may be unable to make decisions on your own. In these scenarios, your successor trustee will automatically be able to take over and do what needs to be accomplished without taking the issue to court.
No Probate Needed
Any assets included within your living trust can automatically be distributed upon your death. This is what many people want because the probate process involved with regular wills can be lengthy and time-consuming.
Controls the Distribution of Your Property
Your living trust will state exactly what can happen to all of your assets upon your death. This ensures no one can do something you do not want after you are gone.
Your Affairs Stay Private
Since there is no probate involved with living trusts, all of your affairs stay private. No one will ever be able to search the public records to see what assets you were in possession of or how they were all distributed after your death.
Disadvantages of Utilizing a Living Trust
Of course, there are always going to be a couple disadvantages of utilizing a living trust. The main issues we normally see include:
In a living trust, you are basically transferring the title of homes and properties. This requires more paperwork, as well as filing fees. These extra fees can really add up, especially when they are in addition to the regular fees you pay to create the living trust. However, many people are willing to pay for the peace of mind they have that all of their assets will be taken care of at their death.
Transfer of Title
Transfer of titles is needed for anything you place in your living trust. This new title is normally in the form of a legal document for items like jewelry and furniture. Any real estate items will require an actual title change.
No Major Tax Advantages
You will still be required to pay taxes on any assets that are part of your living trust. And if any of your assets generate income, you will be taxed on that income as well.
This is just a little of what you must be aware of when considering a living trust. If you have been contemplating creating a will or a living trust, contact me today. I can help you determine which option is best for you before we start the entire process.