Estate planning is the process of getting your affairs in order so that your wishes regarding property, guardianship of children and other issues will be clear in the event of your death. Most people think of estate planning as something only the rich need, but that's not always true.
If you talk to an estate planning attorney, one aspect of this process that may be brought up is a living trust. What is it, why are they needed, and is it necessary for your circumstances? While discussing these issues with your attorney is always advised before making a decision, it helps to have an understanding of what a living trust is before approaching such a conversation.
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What Is A Living Trust?
A living trust is a legal document established to allow a person to transfer the ownership of his or her assets during their lifetime. It does not replace a will, which provides for the transfer of assets after death, however it can act as a supplement to the provisions in your will.
When your assets are transferred to a living trust, they will be held there and still managed by you, if you name yourself the trustee. The assets will be later be transferred to the beneficiaries as set out in the living trust agreement.
There are two general types of living trust: revocable and irrevocable. A revocable living trust can be modified by the person executing its terms. An irrevocable trust cannot be changed.
Advantages of a Living Trust
There are several benefits to living trusts that should be taken into consideration during the estate planning process. The first of these is that you can help your loved ones avoid a lengthy probate process after your death. This is particularly helpful for large and complex estates that can be stuck in probate for years.
Because your assets are transferred to the living trust before your death, technically you are no longer considered the owner. Therefore, these assets are not considered part of your estate to be distributed during the probate process.
Another benefit to a living trust is it comes with certain tax advantages. Your loved ones will likely not be able to completely avoid estate taxes, but an estate planning attorney can advise you on the estate taxes for your circumstances.
One of the key benefits of a living trust is protecting your assets in the event that you become incapacitated at some point in your life. Accidents and sudden illness can leave you unable to manage your financial affairs. A living trust is a place in which you can name a trustee to manage your affairs and use or dispose of them according to your wishes.
Texas estate planning attorney Keith Morris is the co-founder of Jones Morris Klevenhagen, L.L.P. He helps clients with a variety of estate planning issues, including setting up living trusts and powers of attorney and drafting wills. Visit his website for more information.