Planning ahead is always wise, especially when it involves the future of your estate. A living trust is a practical way to prepare for your passing and make sure your possessions are divided how you desire. A living trust is a will that is created while you are alive. In this arrangement one person holds the legal title to another person's property. The person in possession of the title is known as the trustee, and the person who originally owned the property is named the beneficiary. In some cases, a person will become the trustee of their own living trust, so that he or she can have full control over the property. The trustee will transfer his or her control of the property to beneficiaries at the time of death.
The greatest advantage of a living trust is heirs can avoid probate. Probate normally takes months, and heirs are given what the court determines, not necessarily what you would have wished. Also, the probate process is expensive, and some of your heirs' fortune will be eaten up by the costs. In a living trust, the trustee merely transfers the ownership of the property to the beneficiaries that you named in the trust. This normally only takes a few weeks, and bypasses the court fees that are involved in a probate procedure. The living trust evaporates once all the properties have been transferred to the designated beneficiaries, making the process sweet and simple.
If you make a living trust, it is still recommended that you make a will. A will is an important "back up" document, especially for any assets that you don't transfer to yourself as the trustee. A will can help determine the future of any property or possessions that are not claimed in the trust. You can add a clause at the end of the will saying that any property outside of the trust should be granted to a specific beneficiary. If you don't have a will, the courts will determine who receives all of your property that wasn't transferred by your living trust. Normally, the state will give these possessions to your closest relatives, but the court may choose to distribute property in a way you would have avoided.
It is easy to create wills and trusts. To create a living trust, you will need to draft a valid Declaration of Trust according to the state standard. It's always best to get a lawyer involved in the process, just to make sure that the document was created according to the state law. Once the living trust is live, the trustee will be required to fill out a significant amount of paperwork. If you are planning to leave your home to a beneficiary in the future, you will need to sign a new deed that declares that you are the trustee of your living trust, so that the property can be transferred after your passing. The paperwork can be monotonous, but will be worth the hassle.
Unlike a will, a living trust is not public. While a will is made a public record when it undergoes probate court, the living trust is not. This is another great advantage to these trusts, especially for people who value their privacy when dealing with their estate. Unfortunately, living trusts do not protect you from creditors. If you owe debts, then your creditors still have the right to file a lawsuit and claim the trust properties from your beneficiaries. Also, a living trust will not help you to avoid any estate taxes. If your estate is worth more than $5 million then you will need to pay your estate taxes, regardless of what method you use to apportion your assets.