How Can a Living Trust Help Fine-Tune Your Estate Plan?
By Brian Famigletti, Managing Director & Head of Marketing
How a Living Trust Works
If you’re seeking flexibility during your lifetime and help simplifying the transfer of assets after death, consider an estate plan that incorporates a living trust.
While a living trust might not be appropriate in every situation, understanding how one works can help you determine whether it can be an effective tool for you now or in the future.
A living trust is a legal arrangement that allows you to transfer ownership of certain assets into a trust while maintaining control over them during your lifetime. Most living trusts are revocable, meaning you can amend the trust as your circumstances or wishes change.
Depending on your estate planning goals, a living trust may hold assets such as real estate, investment accounts, bank accounts, and certain personal property. Although the trust becomes the legal owner of those assets, you generally continue to manage and use them as you did before transferring them into the trust.
Because the trust owns the assets, though, they can often pass directly to your beneficiaries, per the trust’s instructions, rather than through the probate process. For many people, that’s a good thing.
What Are The Benefits?
Avoiding probate is one of the primary reasons individuals establish living trusts.
Probate is the court-supervised process of administering an estate, which can take months or even longer depending on the complexity of the estate and state law. It may also involve legal fees, court costs, and public records that disclose details about your assets and beneficiaries.
A properly funded living trust may allow many assets to transfer privately and potentially more efficiently to your heirs. It can also provide important benefits during your lifetime if you become unable to manage your own affairs.
By naming a successor trustee, you establish someone who can step in to manage trust assets if you become incapacitated. This reduces the need for court intervention or potential complications associated with relying solely on a power of attorney.
One Piece of the Puzzle
While a living trust can be a valuable estate planning tool, it is not a complete estate plan in and of itself. Creating the trust is only the first step, for assets must be properly transferred and beneficiary designations coordinated with an overall plan to achieve the intended results.
In addition, most comprehensive estate plans still include a will, powers of attorney for financial and healthcare decisions, advance healthcare directives, and other legal documents tailored to your circumstances.
There are also costs associated with establishing and maintaining a living trust, which generally does not provide income tax benefits during your lifetime. Because every family’s financial and estate planning goals are different, it’s important to work with qualified legal, tax, and financial professionals before deciding whether this strategy is appropriate.
A living trust can be an effective way to simplify the transfer of assets, maintain privacy, and provide continuity if you become unable to manage your affairs. When incorporated into a comprehensive estate plan, it may help reduce administrative burdens for your loved ones while ensuring your assets are managed and distributed according to your wishes.
Working with experienced estate planning and financial professionals can help determine whether a living trust aligns with your long-term goals. If you would like help implementing a living trust in your estate plan, contact Griffin Asset Management to speak with an expert today.
Source:
JPMorgan: What is a living trust?
