Benefits And Drawbacks Of Living Trusts
When you create a trust, you are sometimes not actually creating it at that time: you are just setting up the trust to “come alive” when you pass, and to ensure that the property you designate, transfers into the trust.
But sometimes, you set up a trust when you are alive, and the trust exists while you are alive, and continues on until you pass. This is called a living trust, and it can have a number of advantages.
Benefits of the Living Trust
Even though the trust is created when you are alive, in most cases, your beneficiaries won’t receive the property that you designate them to receive until after you pass. Unlike a traditional trust, where you designate a trustee, in most living trusts, you will act as the trustee of your own trust (you will designate a successor trustee to take over for you when you do pass).
This of course also means that you have the freedom to modify or rescind the trust completely, at your will. You can also move more of your property into the trust at a later date, after its creation, or take property out of the trust (although any titled property will need to be retiled when being taken in or out of the trust).
Privacy and Probate Benefits
The living trust has a number of advantages. Your beneficiaries and relatives will be spared the sometimes long and arduous process of probate court. And, unlike probate court, the trust and its information is private; it is not filed in the public records of the courthouse the way that a will may be.
Another benefit to a living trust is that you are still around to verify that whatever you chose to do with your living trust, does in fact represent your wishes. If you are disinheriting anyone, or leaving less property that you feel someone else anticipates getting, you are here to combat any allegations that you are not of sound mind, or that you were a victim of undue outside influence.
This all makes a living trust a great estate planning tool: You get all the benefits of a trust, like privacy and avoiding probate, while still being able to own, control, and manage your property. You also get the benefits of a will, because the trust will designate who gets your property from the trust when you pass.
Of course, with the benefit of control, comes the drawbacks. Living trusts don’t carry the tax benefits that many traditional trusts do. You, as the grantor, are taxed personally on any income generated by trust assets, the same as you would if that property was in your name.
Nor are living trusts very good asset protection vehicles; items put into a living trust often are vulnerable to creditor claims made before or after you pass on.
Call the Torrance will attorneys at Samuel Ford Law today to help you see if a living trust is right for you.