A living trust is a legal arrangement for people who wish to control their assets while alive and distribute them after they die.
It helps bypass the probate process and facilitates a simple, hassle-free property transfer to beneficiaries.
Depending on your situation, it may be an appropriate estate planning tool. But you should consult with a qualified attorney before establishing a living trust.
Grantor
A Living Trust is a document typically created by professionals like those at Cunninghamlegal.com. It outlines how assets should be transferred and distributed to beneficiaries after the grantor’s death. It can also provide a way for a person to ensure that their assets are protected from creditors.
A Living Trust can also protect assets from probate and avoid certain tax costs associated with estate planning. The primary purpose of a living trust is to ensure that your assets are transferred to the right people at the right time and that your wishes will be followed.
There are two types of Living Trusts: revocable and irrevocable. Revocable Living Trusts are very flexible and can be changed or canceled by the grantor during their lifetime.
Some assets that can be placed in a Living Trust include real estate, bank accounts and investments, and personal property such as cars and insurance policies. These assets should be re-titled in the name of the Trust to make them subject to its terms.
Trustee
The trustee of a Living Trust is the person responsible for managing your assets by your wishes. Trustees can be relatives, or they can be professional trustees hired by financial institutions.
When a person creates a revocable living trust, they transfer the ownership of property or other assets to the Trust. They also name a trustee and a successor trustee.
A trustee is a fiduciary who must act in the best interests of the beneficiaries and is often an attorney or accountant with experience in estate planning and taxation.
Some people choose a professional trustee to oversee their revocable living trust, and others prefer to have a family member or friend serve as co-trustee. Generally, it costs you less to have a professional trustee than to have a relative manage your Trust, says Sellers.
Before you transfer any property to a trust, it’s important to get instructions from your bank or other institution on changing the deed to the property. Additionally, it’s a good idea to place with your Trust document a statement about how you would like tangible personal property distributed upon your death.
Assets
When passing on your estate, you want your assets to go to the people you choose without too much hassle or delay. That’s where a Living Trust can help.
A Living Trust is a legal document that allows you to transfer ownership of assets to a third party (called the trustee) while you’re still alive. It also gives you control over the distribution of these assets, allowing you to restrict how they can be used.
You can transfer assets into a Living Trust, including real estate, financial accounts, and personal property. However, it’s important to note that some of these assets may need to be re-titled into the name of the Trust to be covered by its terms.
For example, your home should be re-titled into the name of your Trust to make it available for distribution when you die. However, this can be time-consuming and complicated if you own real estate in more than one state.
Beneficiaries
A Living Trust is an estate planning tool that allows you to name people to receive your assets after death. It’s also a great way to avoid probate, which can be expensive, time-consuming, and an administrative headache.
A living trust can be revocable, meaning you can change its terms anytime during your lifetime. This flexibility allows you to tailor your estate plan to suit changing circumstances and future beneficiaries.
It also protects your privacy if you become incapacitated and unable to manage your finances. Instead of going through a guardianship proceeding (see below), your successor trustee steps in and works the Trust for you and your beneficiaries.
You can also choose contingent beneficiaries, allowing you to add family members or friends you want to include in your estate plan due to your passing. This can help prevent inheritances from being frivolously wasted and ensure your wishes are carried out as envisioned.
Finally, a trust can save you money on estate taxes by avoiding ancillary probate in each state where you own property. It’s essential if you own properties in more than one state.
Taxes
A Living Trust is a tax planning tool that allows you to control your assets while you’re still alive. It also eliminates probate and guardianship for your estate upon your death.
However, some taxes associated with a Living Trust may be a source of confusion or concern for you and your beneficiaries. For example, you may wonder whether a Living Trust saves money over running a will through the Probate process or if you’ll avoid paying estate tax.
Generally speaking, a Living Trust is taxed like any other investment. Therefore, you’ll report any income you receive from your Trust assets on your tax return.
You’ll also need to provide the IRS with a tax identification number (TIN) for the Trust. This is typically done using your social security number.
If the grantor dies before a Living Trust becomes irrevocable, the assets in the Trust pass to the trust beneficiaries at no additional tax. This can be an essential tax advantage if you have highly appreciable real estate or other valuable assets you may want to pass on to your loved ones without incurring additional tax liability.