If you have yet to make an estate plan, chances are good that you have heard the term “living trust” but are not sure what it refers to. Please keep reading, because this is an important legal tool that you may want to consider.
A Trust by Several Other Names
A living trust is referred to as “living” because it is created during the lifetime of the trust’s grantor (the person who creates and funds the trust). In the case of a living trust, you are the grantor and your assets fund the trust.
There are two other names that these trusts go by. They are commonly called inter vivos trusts (which is Latin for “between living people”), and revocable living trusts (or just revocable trusts). This simply means that while you are still alive, you can choose to modify or revoke the trust at any time.
How Does it Work?
You will be the grantor of your own living trust, and will likely serve as its original trustee. You will fund the trust with your own assets, which will technically become the property of the trust. But because you are the trustee, you can still control and utilize these assets while you are still living.
When you pass away or become incapacitated, the trust becomes irrevocable and your successor trustee takes over. The assets contained in the trust are then managed or distributed according to the instructions set up when the trust was created.
What Is The Purpose of a Living Trust?
Living trusts have many benefits if created and managed correctly. They can:
- Largely (but not entirely) replace a will
- Help you avoid probate
- Give you greater control over how and when your assets will be passed to beneficiaries/heirs (such as annual payments or payments that don’t start until the beneficiary reaches a certain age).
- Maintain privacy (because assets placed in the trust while you are living are not part required to be part of the public record)
If you are interested in creating a living trust for yourself as part of a larger estate plan, contact our firm to discuss your options today.