“While a Last Will can help ensure that one’s wishes regarding the distribution of their estate upon death are followed, it is the living trust that allows the estate to avoid probate.”
Living trusts are one of the most popular estate planning tools. However, a living trust accomplishes several goals, explains the article “Living trusts allow estates to avoid probate” from The Record Courier. A living trust allows for the management of your assets in case of disability, manage your beneficiary’s inheritance, create flexibility regarding inheritance issues, and may also reduce estate taxes. A person with blended families, many heirs or who owns real estate should speak with an estate planning attorney regarding using a living trust in their estate plan.
A trust is a fiduciary relationship, where the person who creates the trust, known as the “grantor,” “settlor,” “trustor” or “trustmaker,” gives the “trustee” the right to hold title to assets to benefit another person. This third person is usually an heir, a beneficiary, or a charity.
With a living trust, the grantor, trustee and beneficiary may be one and the same person. A living trust may be created by one person for that person’s benefit. When the grantor dies, or becomes incapacitated, another person designated by the trust becomes the successor trustee and manages the trust for the benefit of the beneficiary or heir. All of these roles are defined in the trust documents.
The living trust, which is sometimes referred to as an “inter vivos” trust or “revocable” trust, is created while the grantor is living to benefit the grantor while they are living. A grantor can make any and all changes they wish while they are living to their trust (within the law, of course).
There are numerous other trusts used to manage the distribution of wealth and protect assets from taxes. Any trust agreement must identify the name of the trust, the initial trustee and the beneficiaries, as well as the terms of the trust and the name of a successor trustee.
For a revocable living trust to achieve its desired outcome, assets must be transferred from the individual to the trust. This is called “funding the trust.” The trust creator typically holds title to assets, but to fund the trust, titled property, like bank and investment accounts, real property or vehicles, are transferred to the trust by changing the name on the title. Personal property that does not have a title is transferred by an assignment of all tangible property to the trustee. An estate planning attorney will be able to help with this process, which may be cumbersome, but is necessary to avoid possible probate proceedings after death to finish “funding the trust.” Funding the trust also creates a list of all your assets together with your estate plan which is invaluable for the people you choose to manage your affairs after your gone.
Reference: The Record Courier (April 3, 2021) “Living trusts allow estates to avoid probate”
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