Do you have a living trust or are you considering opening one? This article will be discussing all the facts about living trusts and what purpose they serve.
What are living trusts?
Living trusts are estate planning tools and not only used by the rich. They are becoming increasingly popular over the years and with everybody. Living trusts are a form of legal arrangement, usually written by an estate attorney and it creates a separate entity called a living trust. A living trust is called that because it is created while you're alive (as opposed to a "testamentary" trust created after death). The living trust involves three people:
The Grantor/Trustor-The individual (or couple) that establishes the trust
The Trustee-the person named by the Trust as the controller of the Trust's assets
Beneficiaries-are the heirs that will benefit from the Trust once the Grantor's have passed away.
What purpose does it serve?
People establish living trusts to protect assets. Anyone with an estate of £100,000 or more can benefit from having a living trust. Estates of £100,000 or more are often subjected to probate in their state of residence, which can cost anywhere from 2%-4% of the estate's value in court and legal fees.
The living trust can also be useful for individuals subject to estate taxes. Through a living trust, a couple is able to maximise their Unified Credit to its fullest. It even accomplishes protection for individuals wanting to avoid conservatorship.
Once you have set it up
Funding your living trust
Once the living trust is established, almost anything can be placed in a trust including savings accounts, stocks, bonds, real estate, life insurance, and personal property. In regards to "funding" the trust, you simply change the name or title on your assets to the name of your Trust. Many people worry about losing control of assets, however, that is not the case within a carefully-constructed Living Trust. The main advantage of living trusts is that they protect your estates assets and they help to minimise your overall estate taxes. Always ensure that you go through the procedure properly and seek professional advice from an estate attorney and research all types of trusts before establishing a property trust. In this way, you can put everybody's mind at rest.