A living trust is a valuable estate planning tool. However, the advantages of a living trust are sometimes oversold. For example, a living trust doesn’t reduce your income taxes nor prevent your beneficiaries from paying estate tax, although you can include estate tax savings provisions in your living trust to ease your beneficiaries’ burden.
Nevertheless, a living trust offers a number of other distinct advantages in estate planning.
1. Maintenance of Privacy
A will is a public document, which means that its provisions may become more widely known than you and your heirs may be comfortable with. A living trust, on the other hand, is a private document, meaning that no one has the right to know what it contains except for the beneficiaries named within.
2. Flexible Management of Assets
Despite the way that many people use them, the terms “living trust ” and “revocable trust” are not entirely synonymous. Nevertheless, most living trusts are also revocable, meaning that you retain control of your assets as long as you are alive, which includes the right to modify the trust at any time.
3. Probate Avoidance
The main advantage of a living trust is not estate tax avoidance, as many people mistakenly believe. It is avoidance of probate. Your probate estate consists of all property at the time of your death that is not either in a trust, held jointly, or has a named beneficiary. The assets that you place into a living trust are no longer part of your probate estate. Therefore, the probate process does not apply to them. What this means for your heirs is that they do not need to wait as long to receive property and assets that are held in a living trust.
4. Protect Your Heirs
Putting assets in trust can help protect them from divorce settlements or future lawsuits. Assets held in trust are generally untouchable except under the circumstances that you dictate. You can also include a spendthrift provision in your trust that restricts your beneficiaries’ rights to transfer trust assets to third parties. A spendthrift provision also prevents creditors from laying hands on assets held in trust.
There is a lot that a living trust can do for you, but it cannot do everything. It may be helpful to think of a trust as a supplement to your will rather than a substitution for it. Depending on your situation, however, a living trust can be extremely helpful in that regard. Contact a living trust lawyer in Sacramento, CA for more information.
Thanks to the Yee Law Group for their insight into estate planning and what a living trust can do.