22 Jul Why Do I Need a Living Trust Versus a Regular Will?
Many people are intimidated by the thought of creating a living trust. After all, it sounds like a legal document that only wealthy people need, right? Not necessarily. There are many good reasons why someone might want to create a living trust even if they don’t consider themselves wealthy.
Most people assume they are all set if they own a home and have a will. After all, the will appoints someone to care for things after they die, right? Well, that’s not necessarily the case.
While it is true that a will can (and should) appoint someone to serve as your executor – the person responsible for settling your estate – a will does not avoid probate. Probate is the legal court-supervised process of settling an estate, and it can be time-consuming and expensive.
On the other hand, a living trust avoids the probate process because the trust property is transferred to the beneficiaries upon your death. The successor trustee – the person responsible for managing the trust – transfers property ownership to the beneficiaries according to your wishes.
There are other benefits to having a living trust, as well. For example, a living trust can:
- Keep your affairs private – Probate is a public process, which means anyone can see how much you own and who your beneficiaries are. A living trust, on the other hand, is private.
- Save your family money – Probate can be expensive, and it can tie up your assets for months or even years. A living trust avoids probate, which means your family will have access to your assets sooner.
- Help you plan for incapacity – If you become incapacitated, a living trust can help ensure that your affairs are handled according to your wishes. With a will, on the other hand, your family would have to go through probate to get access to your assets.
Now, let’s tackle some of the people’s most common questions about living trusts.
What Is a Living Trust, And What Does It Do for My Family and Me?
A living trust is a legal document that allows you to transfer ownership of your assets to a trustee or a family member. The trustee then manages the assets for your benefit, and upon your death, the assets are transferred to your beneficiaries according to your wishes.
There are two types of living trusts: revocable and irrevocable.
A revocable trust, also known as a living trust or a revocable living trust, can be amended or revoked at any time. This means you can change the terms of the trust or dissolve the trust entirely if you so choose.
On the other hand, an irrevocable living trust cannot be amended or revoked after it has been created. This means that once you create an irrevocable trust, you will not be able to make any changes to it.
Most people create revocable trusts because they offer more flexibility than irrevocable ones. However, there are certain situations where an irrevocable trust may be the best option. For example, if you are trying to qualify for Medicaid, you may need to create an irrevocable trust.
How Is a Living Trust Different from a Will?
The most significant difference between a living trust and a will is that a living trust avoids probate. Probate is a legal process that can be time-consuming and expensive, and it can tie up your assets for months or even years. A living trust avoids probate, which means your family will have access to your assets sooner.
Another difference between a living trust and a will is that a living trust is private, while a will is public. This means anyone can see how much you own and who your beneficiaries are if you have a will. However, if you have a living trust, your affairs are private. This can give your family peace of mind, knowing that your affairs are not public knowledge.
Should I Choose to Have a Living Trust Over a Will?
You may choose to have a living trust over a will for many reasons.
One of the most significant benefits of a living trust is that it avoids probate. Probate can be time-consuming and expensive and can tie up your assets for months or even years. Avoiding probate can help your family save time and money by a living trust.
A living trust can also help you plan for incapacity. If you become incapacitated, the trustee will be responsible for managing the trust and distributing the assets to the beneficiaries according to your wishes. This can take much stress off your family, knowing that your affairs are being handled according to your wishes.
On the other hand, a will does not avoid probate and does not provide for incapacity planning. This means that if you become incapacitated, your family would have to go through probate to get access to your assets.
What Are the Benefits of Having a Living Trust?
Aside from the benefits we’ve already mentioned, there are many other benefits of having a living trust.
A living trust can help you save on taxes. You may be subject to estate taxes if you have a large estate. However, if your assets are held in a living trust, they may be exempt from estate taxes.
A living trust can also help you keep your assets safe from creditors. If you have creditors, they may be able to take your assets if they are held in your name. However, if your assets are stored in a living trust, they may be protected from creditors.
A living trust can also help you manage your affairs if you become incapacitated. As we mentioned, if you become incapacitated, the trustee will be responsible for managing the trust and distributing the assets to the beneficiaries according to your wishes. This can take much stress off your family, knowing that your affairs are being handled according to your wishes.
Which One Is Right for You, a Living Trust or a Will?
The answer to this question depends on your circumstances. However, there are some general guidelines that you can follow.
If you want to avoid probate, save on taxes, and keep your assets safe from creditors, then a living trust may be the right choice.
On the other hand, if you don’t mind going through probate and don’t have many assets, then a will may be the right choice for you.
Ultimately, the decision of whether to choose a living trust or a will is up to you. We hope this article has helped you understand the difference between these two legal estate planning documents and how to choose which one is right for you. We can help with your planning; please contact us at https://guidewaylegal.com/contact/.