Creating a comprehensive estate plan may seem complicated and overwhelming for some. Not only do you need to include the correct information and forms, it is critical that you customize the plan to fit your specific needs.
You have many options on how to distribute your property and assets once you pass. A living trust offers many benefits when it comes to property distribution, according to The Balance. Yet, it is not for everyone. It is important that you understand how a living trust works so you can make a decision that is best for your family.
What is a living trust?
A living trust is a legal entity used to store and control the property and assets you wish to distribute once you pass. A revocable living trust allows you to make changes and remain in control of your trust throughout your lifetime. While you are the trustee in this type of trust, you must name a trustee who will take over your duties once you pass.
An irrevocable living trust, on the other hand, takes ultimate control of your property once you place it in the trust. The trust takes ownership of the property and assets placed there.
You can place anything in the trust, including real estate, valuable personal property, vehicles, investments and bank accounts.
What are the benefits of using a trust?
A trust may give you several benefits, including the following:
- Avoid the probate process
- Ensures privacy, as trusts are not a matter of public interest
- Allows direct transfer of property to designated beneficiaries
In an irrevocable trust, property may escape estate taxes. This is because the estate does not belong to you, but is in the trust.
Setting up a trust may give your loved ones more of the property and assets you intended them to have, rather than lose a portion of it to taxes and probate.