What is a living trust?
A living revocable trust is a trust you create during your lifetime. Trusts are not just for the wealthy anymore. More and more families are using trusts to transfer property to their surviving spouse and loved ones quickly and easily.
Here are some of the main advantages of trusts.
- Private. The contents of your trust and its terms are not a matter of public record. This is why many celebrities use trusts as their primary estate planning vehicle.
- Immediately able to transfer your assets. The transfer of assets to beneficiaries is automatic upon the deaths of the settlor(s) or the happening of the specified event that terminates the trust. There are no court delays and property can be transferred quickly.
- Inexpensive to manage. You can be the trustee of your trust and avoid paying someone else to serve as trustee of the trust.
- Able to avoid probate. If your trust is properly funded, your property will not have to go through probate.
- Able to help your children manage money. You control how and when money is distributed to your beneficiaries.
- Able to protect your assets from long-term care costs and other creditors. Certain types of trusts with special restrictions can protect your money and other assets from future nursing home expenses and from creditors.
- Able to designate someone else to manage your property if you become incapacitated. Without a trust or a durable financial power of attorney, your family may have to petition a court to have you declared incompetent and to be able to manage your property.
Why you may want a trust:
If you own property in multiple counties or states, you may be looking at multiple probates and delays. A trust can avoid probate and save your estate time and money.
Without a trust, your property may be distributed outright to children or other family members who can't manage money. Many people who inherit money all at once, spend it all within a few years.
Property distributed under your will or a beneficiary designation may not be protected from creditors or from divorcing spouses. Your assets could end up with your ex-daughter-in-law or ex son-in-law!
If you become incapacitated, court action may be necessary for someone else to manage your property. A court may have to appoint someone to manage your property and make important decisions for you.
Wills have disadvantages.
- Wills are Public. All estate inventories, accountings, creditor claims, and distributions are a matter of public record and anyone can access the estate file. Everyone will know how much money you have, to whom you leave your money, and which bills you haven’t paid. The names of your beneficiaries will also be public.
- Wills are unable to transfer assets immediately. Assets are “frozen” during probate and may remain frozen until probate ends. Before any estate property can be transferred to a beneficiary, the estate must be opened, a personal representative must be appointed by the court, and creditor claims and other expenses must be paid. If there is property left over after claims and expenses are paid, the personal representative can distribute the property.
- Wills may be easier to challenge than trusts. If there is a challenge to a will, the entire estate and all the property it contains may have to be frozen until the dispute is resolved. This delay can last for months or years depending on the length of the dispute.
For more information, about whether a living trust is right for you contact us by completing the contact form, emailing us or calling 704.887.5242 to schedule a strategy session with Nancy in our Ballantyne office.