What is a Living Trust?
March 07, 2016
A living trust is one of the most prevalent estate planning tools in use today. Most people use a living trust instead of a will to avoid probate, a court-supervised process for transferring assets to the beneficiaries listed in your will, which can be expensive and exposes your estate to public record. A living will does not avoid the estate tax but makes the settlement process much easier.
Living trusts are most appropriate for those with substantial assets or complex estates. In general, financial planners frequently recommend them for individuals or couples with an estate of $1 million or more. Estates of this size typically are subjected to probate in the deceased's state of residence, which can cost anywhere between 2% and 4% of the estate's value in court and legal fees. Young couples without significant assets and without children, who intend to leave their assets to each other when the first one of them dies, generally would not benefit from having a living trust.
Naming a Trustee
When establishing a living trust, most people name themselves as the trustee in charge of managing the trust's assets. You can also name a successor trustee, either a person or an institution, who will manage the trust's assets if you ever become unable or unwilling to do so yourself. You can amend or revoke the trust at any time.
Almost any type of asset can be placed in a trust: savings accounts, stocks, bonds, real estate, life insurance, business interests, and personal property. To fund a trust, one simply changes the name or title on one's assets to the name of the trust.
Spouses and Domestic Partner
Since a living trust can hold both separate and community property, it may be a convenient estate planning vehicle for spouses and registered domestic partners to plan for the management and ultimate distribution of their assets in one document
Wills Versus Living Trusts
|Probate||Subject to probate
Become public record
|Not subject to probate
|Costs||Generally cost less to create, but probate costs can be significant.||Generally cost more to create, but probate is avoided.|
An estate planning attorney can advise you on whether a living trust is appropriate for your personal situation. This type of "substitute will" may help you transfer assets to your heirs in a way that maintains your privacy
For additional information, call Washington Trust Wealth Management at 800-582-1076.
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