What is a living trust? Do you need one?
A living trust or revocable trust is an arrangement in which the owner of property, or grantor, transfers said property to a trustee, who in turn administers the property according to the terms of the trust for the benefit of one or more beneficiaries. The trust begins when it’s created and continues after the death of the person who creates it. The trustee is responsible for managing the assets according to the provisions of the trust agreement. The grantor and trustee can be the same person, and the grantor can benefit from the assets held by the trust during his lifetime. The grantor can also change or revoke the provisions of the trust agreement if he chooses.
Does it make sense to have a revocable trust?
One of the advantages of trusts is that they avoid probate for the assets they hold. As a result, they may help to avoid costs and delays that can be associated with probate. Another advantage is that they are administered privately, as opposed to probate, which is a public court proceeding.
A trust can be advantageous for real estate, which otherwise would be subject to probate. If it is in trust, the trustee would be able to take any actions required to act quickly without need for court approval, including when maintaining, leasing, selling, or otherwise maintaining the property.
Having a trust can also be beneficial if there are children in the picture. First, minor children cannot hold or receive assets, but the trust can hold assets on their behalf. Second, the trust can address issues related to guardianship, and provide for the welfare of the children.
The trust also can preserve assets by establishing limitations on distributions based on age or other factors, increasing the chance that the proceeds will be put to good use. This is particularly useful when the beneficiaries are young adults in their late teen years or early 20s. Spreading out the distribution over time avoids burdening these young adults with a large influx of assets all at once.
In addition, a trust can be a useful mechanism to take care of and provide for a person with a disability. If that person requires significant medical care or is not able to handle financial responsibilities right away, a trust can provide that the necessary support while ensuring proper oversight.
To summarize, a revocable trust may be an appropriate way to handle a variety of assets and family situations. If some of the factors outlined above apply to your family, contact us to determine whether a trust could provide a material benefit.