Estate planning is a dreary topic. However, unless you want to leave your family in the lurch, it’s absolutely necessary.
Most of us are familiar with last will or testament for wealth distribution to our beneficiaries. This will only take effect once we die. However, there is another wealth distribution strategy, which is in contrast, takes effect during your lifetime and it is called LIVING TRUST.
A living trust is similar to a will. In the former, a trust is created while you’re still alive. During your lifetime, you reap the benefits. After you pass away, they’re transferred to your beneficiaries. Below are the benefits of a living trust.
If you’re thinking about setting up a living trust, there’s a good chance that you’ve heard horror stories about probate.
Probate is the process of proving and registering in the court the last will of a deceased person. It is usually the executor of the will who administers the estate and handles the disposal of their assets and debts. In order to get authority to do this, the executor usually need to obtain a legal document called a ‘Grant of Probate’
Avoiding the probate process is one of the top reasons why people are attracted to trusts. Going through probate can be a long process. Your heirs will likely receive their benefits sooner if you set up a trust.
According to Chicago trust attorneys Peck Ritchey, LLC: “Aside from the fact that trusts help to minimize estate taxes, your loved ones will likely be able to avoid the probate process… Setting up a trust can allow your family to avoid uncertainty, extra expenses, and potential arguments so they can focus on the emotion of the moment and coming together.”
In addition to being tedious, probate is also public. Wills become part of the public record. By contrast, a living trust is a private document.
Anyone who’s curious about your estate can look up your will after it’s filed and find out exactly who your beneficiaries are. They can view lists of your creditors and assets.
Families have been driven apart by the contents of unpopular wills. There are many reasons why someone might value privacy in their estate planning.
Less Likely To be Contested
A will is significantly more likely to be contested than a living trust. It’s easy to see why.
Your trust will go into effect while you’re still alive. That’ll make it very difficult for someone to argue that you weren’t in your sound mind when you distributed your assets.
However, to contest a will, someone simply has to say that you weren’t competent to sign it. Their effort will probably fail but clearing the matter up can take a lot of time.
Allows for Future Medical Incompetence
There may come a time in your life when your faculties become impaired. At that point, it’s too late to create a trust or a will. If you’re not prepared for that moment, your loved ones will be forced to go to court in order to take control of your affairs.
In your living trust, you can specify exactly what you want to happen when you’re ill. Your trustee can legally take over the management of your concerns the moment you’re deemed to be incapacitated.
What are its Disadvantages?
A living trust has a higher upfront cost than a will. You might have to update it as your situation changes, incurring even more costs. The process of setting up your trust can be time-consuming. Funding doesn’t occur automatically, you need to transfer all of your assets.
A living trust is a good estate planning option for people who need privacy or want to avoid probate. For many, the benefits of the arrangement far outweigh the drawbacks.
If you can afford to start the process and you have a family or significant assets to protect, you should seriously consider a living trust.
However, if you can’t afford to pay the upfront costs, you should think about creating a will instead.
Contact a lawyer to discuss the details of your situation. A good attorney will be able to help you figure out if a living trust is a good idea for you.