Last Will and Testament Articles >> The Advantages of a Living Trust

The Advantages of a Living Trust

A living trust protects your assets during your lifetime and beyond. Primary among the many reasons to establish a living trust, the trust you establish during your life allows you complete control of your property now and also protects your interests and those of your beneficiaries following your death. Control and protection are only two of many advantages of a living trust, however.

Advantages of a Living Trust

A living trust is a legal arrangement and document that appears similar to a will. You set up living trust documents to make arrangements for your assets and property following your death. A living trust also sets conditions for the management of your assets should you become incapacitated. Many consider a living trust to be superior to a traditional will, however.

No Need for Probate

When you have a will prepared, the will must be processed by the court before any distributions of property can be made. This process is called probate and can be drawn out and expensive. Should you die without making any arrangements or if your will doesn’t make proper provisions, the court will make decisions on your behalf.

A living trust is not a will, so it does not require probate. When you place your assets into a living trust, the assets belong to the trust – not you. You are likely the trustee of your own trust allowing you to manage those assets as you please, but should you pass, the trust will pass to your assigned successor and any instructions and clauses you’ve included in the trust will be carried out without any help – or interference – from the legal system.

Significant Savings

A living trust can be expensive to establish if you choose to have a lawyer draw up the paperwork rather than download and create your own, but even an expensive lawyer-assisted trust is far less expensive than probate and delays caused by a will following your death.

You can also include a formula clause in certain types of living trusts if you are married which allows you to double the estate tax savings through state and federal exemptions. If your estate is greater than the amount set by the government, a formula clause takes advantage of the unlimited amount you can gift your spouse after your death.

Should you pass, your beneficiaries, usually children and grandchildren, will get an amount up to the set limit before estate taxes are levied. Then, rather than pay taxes on the remaining assets, the property is transferred to the spouse where there is no estate tax due. When your spouse passes, any remaining property is distributed and estate taxes are paid only on the amount over the limit for that spouse. This substantially lowers tax liability for your beneficiaries.

Privacy

When a will enters probate proceedings, the contents and decisions within the will are no longer private. But a living trust allows you to make arrangements as you see fit for all parties, including minor children, and then have those decisions carried out by a discreet successor rather than allowing the court and any interested party access to your documents and property arrangements.

Uncontested Arrangements

To contest a will, you must simply prove the person writing the will was not sound or was coerced on the day it was signed. While a will is contested, all assets are frozen as well. To contest a trust, someone must prove that you were not sound on the day it was formed and on every following day of your life that you managed the trust. This adds solid protection to your property and decisions even when you are no longer around to protect them yourself. Even if a living trust is contested, no assets are frozen and distributions continue normally.

Control

A living trust does not take away any control of your property while you are living. Your assets become part of the trust, but as manager of a revocable living trust, or trustee, you continue to use, manage, and change your assets as you see fit. In fact, a living trust gives you more control than a will as it lets you make arrangements for your property and its management following your death or incapacitation.