As we get older, it’s important to think about our financial security. We want to make sure that we have the ability to survive and hopefully thrive in our old age. But what about beyond old age? Yes, I’m talking about securing finances after we have passed. The intent is to make sure that future generations can be taken care of, and our hard-earned money can put toward it’s intended use.
To that end, a living trust is worth considering.
A living trust is legal document that offers a benefit of allowing you to effectively transfer wealth to your heirs. It’s an agreement that gives you the opportunity to move your assets to a trust. The trust itself is administered by a trustee on behalf of individuals who have been specifically designated as beneficiaries by you, though during your lifetime you can act as the trustee.
So, why would anybody have a living trust? Here are 5 benefits:
- Probate. Probate is the process where a court determines the validity of a will. It can be a process that takes a long time, and has the potential to generate significant fees. With a living trust, that specific process doesn’t occur. Avoiding probate means you might avoid such issues.
- Privacy. These are private documents, and are not a matter of public record. If privacy of high importance to you, a living trust can provide you with more from that standpoint.
- Simplicity. A living trust can help to simplify your finances for your heirs. The trustee can manage the estate according to your wishes, and help your family manage the responsibility of dealing with a complicated estate.
- Control. A trust gives you more flexibility in how your assets will be distributed. For example, instead of having a beneficiary receive an inheritance in a lump sum, he or she could receive installments of it at different age milestones
- Taxes. A living trust could potentially be structured in such a way that estate tax liabilities could be minimized
Of course, I recommend consulting a professional financial planner and/or tax advisor first, before making any decisions. That said, it’s good to consider alternatives for managing assets and transferring wealth, and a living trust is an option to keep in mind.
Do you have any additional benefits of living trusts that you can share? Any drawbacks?
One of the disadvantages could be finding a trustee that is, well, trustworthy. I know of an example in my extended family where the “trustee” engaged in churning of some of the equity assets in the trust. My wife and I set up our living wills relatively inexpensively. I wonder if the fees for a living trust may be more expensive? Still, the potential to avoid probate is very attractive indeed.
Andrew, you do make a good point about finding someone trustworthy. That’s a decision which should be made very carefully, hopefully after knowing the person for many years – decades, ideally, in my view. The probate avoidance does seem like a pretty good benefit, I agree.
I have a living trust, and a will. I wanted the trust for financial protection, and the will so I could designate a guardian for the kiddos if anything happened to both my husband and I.
Everyday Tips – good work, you’re clearly on the ball!
What great information! I agree that specifying how money is used/allocated can spare the heirs a lot of grief. The probate advantage alone is just huge!!!!
Roshawn – thanks, glad you think it’s good information! Probate avoidance is very attractive, and I agree with your thoughts on how the decision-making power/stipulations can make things better for the heirs. Hey, if it’s my money, I want to control how and when it’s dispersed!
Nicely done Squirrelers!
This is one area that you just made easy that people shy away from!!! 🙂
Money Reasons – thanks! I agree that it’s an area people shy away from. One of my reasons for putting this piece together was to help myself and readers learn more about this topic, to at least become more familiarized.
A Trust is a legal document that holds title or ownership to your real property and assets. When you create a Living trusts you transfer ownership of your assets to the Trust. You do not relinquish any control of your assets. You may still buy, sell, borrow or transfer assets to and from the Living Trust.