What are the benefits of a living trust?

On Behalf of | Jan 13, 2021 | Estate Planning |

 

Estate planning is not for the faint of heart. The often complicated process involves careful consideration and drafting of several documents that will be used to settle your property. While you may have created a last will and testament, you and your beneficiaries may benefit from creating a living trust.

According to The Balance, a living trust is designed to ease the transition of ownership from you to your beneficiaries once you pass. It also has several other advantages.

How does a living trust work?

Trusts differ from wills in that they help to manage your finances while you are alive, and then carry out your wishes once you pass. These legal entities can manage anything from property and vehicles, to bank accounts, retirement plans, jewelry, fine art and intellectual property.

When forming a trust, you can either grant ownership of the property to the trust immediately or retain ownership of the trust until you pass. If you choose to pass ownership to the trust, your name is taken off the title to the property, and you are no longer responsible for taxes or fees tied to that property.

You must also name a trustee, or the person who will take over the responsibilities of ensuring your wishes are carried out according to how they are written in the trust.

What are the benefits?

Depending on your unique situation, establishing a trust may come with benefits. These include the following:

  • Privacy, as trusts are not matters of public record unlike wills
  • Convenient, as trusts may skip the probate process that wills often go through to establish validity
  • Simple transition of ownership, as property and assets in the trust transfer directly over to the beneficiary named in the trust

Revocable living trusts, or trusts where you sign total ownership over to the trust, also reduce or eliminate estate taxes.