Are you considering creating a living trust? If so, it's important to know what a living trust is used for. This article will help you become familiar with the living trust and some of the key terms that apply when creating one.
What Is A Living Trust?
A living trust is a legal construct that deals with estate planning. When you have a living trust you are able to move your property and assets into the trust to protect it and make sure that it is passed on to the people you select.
A living trust is different from a last will and testament in that it doesn't take affect only when you pass away. It is active the moment it is executed.
Here are some of the benefits of a living trust:
- A living trust can typically avoid the probate process.
- Provides privacy. A living trust cannot become public record.
- Potential tax benefits.
- Transfer of ownership is much easier.
What A Living Trust Does Not Do
Living trusts deal primarily with holding assets and property. This means that there are some things that a last will and testament will take care of that a living trust can't.
Living trusts do not help you designate a guardian for any minor children that you have. You are also not able to indicate your wishes when it comes to your funeral and burial. When you create a living trust, you will most likely create a pour-over-will that addresses these matters.
The grantor is the one who creates the living trust. A grantor will create a living trust in order to protect their assets and ensure that they are managed and distributed in the way they see fit.
When the grantor creates the trust, they will designate which assets and properties will be held in the trust. They will also select the trustees and beneficiaries.
A beneficiary is someone who will receive assets or property from the living trust. At the time that the grantor designates, ownership of the asset will transfer from the trust to the beneficiary.
A trustee is a person that manages the trust on behalf of the grantor. They are responsible for maintaining the assets and also distributing them in the way that the grantor determines. The grantor can either appoint themselves as trustee, or someone else.
The successor trustee is the person who will take over the management of the living trust if the first trustee passes away. They will inherit the typical duties of the trustee.
If the grantor wishes, they can assign more than one trustee. A co-trustee works with the trustee to manage the trust and distribute assets.
If you are doing your estate planning and you have assets and property that you want to protect, a living trust may be the best solution. Consult with an estate planning attorney like Jolein A. Harro, P.C. who can assist you with drafting the document.