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What does a Living Trust do?

A wall with the word trust engraved on it

 

A Will comes into play only after you die, but a living trust can actually start benefiting you while you are still alive. A living trust is a trust established during your lifetime. It is revocable, which allows for you to make changes. You will transfer substantially all of your property into your living trust during your lifetime, and any omitted assets can be transferred into the trust at the time of death through the use of a simple Pour-over Will. You should always make a Pour-over Will at the time that you establish your trust.

 

A living trust will be used as the mechanism to manage your property before and after your death, as well as provide how those assets, and the income earned by the trust, are distributed after your death. If you should become incapacitated or disabled, the trust is in place to manage your financial affairs, usually by a successor trustee, if you were serving as trustee. A living trust is not subject to probate, and therefore, all provisions of the trust will remain private.

 

Joint living trusts are also possible. They simply combine the assets of a husband and wife into a single trust, governed by a single trust document. However, if estate tax minimization is important (for combined estates which will exceed the statutory limit imposed by Congress), the joint living trust must be very carefully drafted with the help of an attorney in order to achieve the desired goals.

 


 

What happens if I don't have a Will or Living Trust?

 

The legal term for dying without a Will is dying intestate. If you do not specify through a valid Will or Living Trust who will receive your property, state law controls and generally distributes your property to your spouse and/or your closest heirs. This may or may not be what you intended. Furthermore, if you fail to nominate a guardian for your minor children, the state could appoint someone you don't trust as a legal guardian of your minor children. Finally, by failing to appoint someone to carry out your wishes, the state can appoint anyone to be the administrator of your property, and the administrator may have to pay certain fees or post a bond at the expense of your estate, before he or she can begin to distribute your assets.

 

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