Living Trusts

Using a Living Trust to Avoid Probate

Trusts are formed to hold and manage property for beneficiaries. Although a Will speaks only from the moment of death, trusts begin speaking when they are created. A living trust is created while you are alive to manage your property during your life and to provide what happens to it after you die.

What Is a Trust?

A trust is a legal agreement which appoints a trustee to hold, manage and distribute property for the benefit of another person (or people or pets) who are known as beneficiaries. Trusts can be used for a variety of purposes in estate planning. Living trusts are used to manage assets and avoid probate.

A “living trust” is not offered for probate and its contents are not a matter of public record. If there is concern about making a Will public, a “living trust” is a good alternative. It is often called a “Will substitute.”

Creating a Living Trust

One of the most common types of trusts used in estate planning is known as a “living trust.” Whether it makes sense in your situation depends on the nature of your assets, the desire to avoid probate or to save on taxes, and the ease of transferring what you own into the trust.  A living trust can be a valuable tool to:

  • Avoid probate and have your affairs remain private.
  • Allow assets to remain together (such as a family business) and held in further trust after you pass away, as a continued resource for children or family.
  • Enable another person to manage your finances if you become mentally incapacitated.

With a living trust, you have use of the trust funds in the same way as if you owned the property in your own name. These trusts are revocable, which means you can change them at any time.

How Living Trusts Work

  • The trust is established when you are alive and you are named as trustee and beneficiary.
  • You transfer assets you own to the trust.
  • Title to property must be changed to the name of the trust!
  • Deeds to real estate must be changed.
  • Names on bank or investment accounts must be changed.
  • You have use and access to trust property as if it were your own.
  • A separate tax I.D. is not needed, nor is a separate tax return filed for the trust. For tax purposes, it’s still considered your asset.
  • At your death, a new trustee takes over, and assets are held in further trust or distributed per the trust document.

Living trusts are called “Will substitutes” because they can be created to distribute all of your assets, in place of a Will.

Typically, if people establish a “living trust,” they also execute a simple Will which leaves everything to the trust. In this way, if there is any small asset or personal property not owned by the trust, that base is covered.

Contact an Experienced Estate Planning Attorney

Call Susan G. Parker at (888) 305 – 2009 for assistance with Wills, Trusts, health care proxies or business services.