When it is time to complete your estate planning, give strong consideration to creating a living trust. A living trust provides for distribution of your assets according to your instructions.
But what other reasons are there for choosing a living trust for asset distribution?
That is the subject of today’s article as we reveal the three biggest advantages of a living trust.
A Living Trust Avoids Probate
The most significant advantage of a living trust is that it enables your estate to “bypass” probate.
Probate is the court-supervised process that allows for the dispersal of your assets according to your instructions by your executor. All wills must go through probate, a process which can take several months or even years.
A living trust, on the other hand, is not subject to probate. As such, your family only has to wait for a few weeks to receive any death benefits, saving them considerable time.
Your successor trustee must pay your debts and distribute your assets as you wish.
A Living Trust Maintains Your Privacy
A will is a public document. That means the information contained in your will is a matter of public record. Anyone can search public records to find out about the distribution of your assets.
A living trust, on the other hand, is a private document and the information therein remains private. A living trust is strictly between you and any parties involved, and your estate is distributed in private.
A Living Trust May Save Money
While creating a living trust may cost more than drafting a will initially, upon your death it may save your survivors considerable money.
When you set your living trust, the first thing you must do is fund the trust. In other words, you need to transfer all your financial accounts and certificates to the trust through legal documents.
Other items must be considered as you establish a succession plan for your estate. You’ll need to change the beneficiaries on any life insurance policies to your trust. You will also need to make arrangements for your IRA or 401k plan.
Finally, you must create a pour-over will which provides instructions for assets which are acquired between the time your living trust is created and your death. A pour-over will also covers assets you may have overlooked or excluded from your living trust.
As you can see, there is some initial time and money that must be invested in the creation of your living trust.
However, your survivors will be grateful for your efforts because it will likely save them time and money. Your assets will not be subject to probate and they will be able to settle matters in considerably less time. Probate costs are taken from the will, something your heirs can avoid with a living trust.
Advantages of a Living Trust: The Bottom Line
Remember, planning for the distribution of your estate is a gift to your loved ones. It relieves some of the pressure during a difficult time by providing clear instructions for the distribution of your assets.
Young couples with no children or those with a small estate may benefit from a simple will. However, if you have assets and wish to pass them on to your heirs, you may wish to enjoy the advantages of a living trust.