If you are thinking about creating an estate plan, you may know that you need to prepare a will. But do you know other aspects of estate planning, such as a living trust? You may believe that a trust is something just for famous people, however, that is not true. Your circumstances may prove that the best option for your family is to have a living trust. If you are not aware of the difference between a will and a living trust, here is a breakdown.
Will vs a living trust
A living trust is a document that is prepared while you are alive that will transfer all your assets and property to a trust. At the time of your passing, those assets will immediately transfer to your designated beneficiaries. The person in charge of transferring your assets to your beneficiaries is called a trustee. A will is a document that you also prepare that provides guidance on how you want your assets to be distributed after you die. However, with a will, the person in charge of handling your assets is called an executor and they will have to go through a process called probate. A living trust goes into effect immediately upon its completion while you are still alive, a will does not go into effect until your death.
The benefits of a living trust
Nearly every living trust is revocable, which means it can be changed at any time before your death. Here are some reasons why you may choose a living trust:
- Assets can skip the probate process and go directly to heirs.
- You will have maximum control over your estate.
- Living trusts can lower or possibly prevent estate taxes in many situations.
- You can name a trustee who is able to make decisions about assets if you become incapacitated for any reason.
- The assets placed in a trust can typically be protected from any legal action or from creditors.
- You can put limits on the spending of beneficiaries and provide for future generations of family.
When you only have a will, once you pass away it will be sent to probate which is made public. This means your assets and debts will not be private. But with a living trust, since probate will be avoided, the information about your assets can remain private.
A living trust can be used to serve many purposes for you as you retain full control of your assets. You may find that a living trust is the best estate planning choice for you once you take the time to understand its benefits and how it can benefit your family.