What's the difference between a living trust and a will?
A living trust is an estate planning tool that takes effect immediately upon creation, allowing you to manage your assets both during your lifetime and after your death. It appoints a trustee to manage these assets and directs how they should be distributed to beneficiaries upon your death. In contrast, a will is a document that outlines your wishes for asset distribution and guardianship arrangements but only becomes effective upon your death. Unlike a living trust, a will typically requires probate, the legal process through which assets are distributed under court supervision.
Can I be my own trustee in a living trust?
Yes, you have the option to serve as the trustee of your own living trust, giving you control over the assets within the trust for as long as you remain mentally and physically capable of managing your affairs. This arrangement provides flexibility and control over the trust's assets during your lifetime.
What happens if I become incapacitated with a living trust in place?
Should you become incapacitated, the living trust allows for a smooth transition of management responsibilities to a successor trustee you have previously named. This successor trustee then assumes control over the trust's assets, managing them in accordance with the guidelines and purposes you've set forth in the trust document, ensuring continuity in asset management without court intervention.
Does a living trust avoid probate?
Yes, one of the primary advantages of a living trust is its ability to bypass the probate process. Assets held within the trust are directly transferred to the beneficiaries specified in the trust document upon your death, facilitating a quicker and more private distribution process compared to the public and often lengthy probate procedure.
Can I change the terms of my living trust?
If your living trust is revocable, you retain the flexibility to alter the trust's terms at any point during your lifetime. This includes the ability to add or remove assets from the trust, change how assets are distributed to beneficiaries, or modify the successor trustees.
Are living trusts only for the wealthy?
Living trusts are beneficial for individuals across various financial spectrums, not just the wealthy. They offer advantages such as asset management during incapacity, avoidance of probate, and privacy in asset distribution, making them a useful estate planning tool for anyone seeking to simplify and control the management and distribution of their assets.
What types of assets can I put into a living trust?
A wide range of assets can be placed into a living trust, including but not limited to, real estate, bank accounts, investment accounts, and personal property like vehicles and jewelry. Essentially, most assets you own can be transferred into the trust to be managed according to your wishes.
How does a living trust impact taxes?
For the majority of individuals, having a revocable living trust does not alter the way taxes are paid on the assets within the trust during their lifetime. The trust's income is typically taxed on your personal income tax return, and there is no separate tax identification number required for a revocable living trust.
Can a living trust protect assets from creditors?
Assets held in a revocable living trust generally do not offer protection from creditors during your lifetime. Creditors can still access these assets to satisfy debts, as the trust's revocable nature means you maintain control over the assets, keeping them within reach of legal claims.
What happens to the living trust after I die?
Upon your death, the assets held within the living trust are distributed to the designated beneficiaries as outlined in the trust document, effectively bypassing the probate process. The successor trustee oversees this distribution, ensuring that your wishes, as expressed in the trust, are carried out efficiently and privately, in accordance with your estate planning objectives.
