Perhaps the biggest benefit to creating a Trust is that your heirs will avoid the probate process. Probate, simply put, is the legal process that occurs after you pass away and can often involve a court reviewing estate planning documents. A probate court will look at the validity of your will, have your property appraised, ensure that your debts have been paid and more. A Living Trust is not subject to the probate process, so property and assets you leave there go straight to your heirs without the sometimes lengthy delay that comes part and parcel with probate.
It's highly recommended you talk to an estate planning attorney if you're considering a trust, but here are a few things you should consider when deciding.
If you're married, your spouse will usually be able to inherit jointly held property without the hassle of probate.
While probate can be a bit of an annoyance, generally, only a small percentage of your estate will go to probate costs. The larger your estate, the more you should consider a Living Trust. Trusts are also a great way to transfer business ownership, so if you run your own small business, speak to a qualified attorney for help passing your life’s work along.
Since the assets you'd like to pass along in your Trust need to be held and owned in the trust itself, it often doesn't make sense to transfer ownership to a Trust when you're young. For example, say you want to pass along a home in your Trust. Since younger folks tend to move more, keeping the title and deed in your name makes selling much, much easier.
No matter what, even if you do decide to make a Living Trust, you'll want to create a Will. It's a good backup, allows you to name guardians for your children, and can create a catch-all beneficiary for any property you didn't specifically leave to a certain heir.
Though the ins and outs of Trusts can be complicated, the basics aren't too hard to understand.
A Trust has three main roles: the settlor, the trustee, and the beneficiaries. The settlor is the person who creates the Trust and the beneficiaries are the people (or person) who will receive whatever assets are in the trust. The trustee, meanwhile, is simply the person or institution that holds the property until the Trust's conditions are met. This can be after death or, sometimes, when the beneficiaries become legal adults or certain other conditions are met.
Trusts are a great vehicle for taking care of minors (children or, commonly, grandchildren) as well as giving to charity. And, as we've mentioned above, Trusts are the best way to avoid the probate process, which can be both time-consuming and frustrating for grieving families.
But setting up a Trust is more complicated than making a Will. While you can certainly make your own Living Trust, it's highly recommended you speak with a knowledgeable attorney, to decide if a Trust is right for you.
While both a Trust and a Living Trust allow you to leave property and assets for your heirs, a Living Trust actually lets you receive money or other assets from the Living Trust. You won't be able to simply dip into the Living Trust and use it as a piggy bank, but you can set it up so that your Living Trust pays you a stipend as a beneficiary.