Living Trust Benefits
Living Trusts has become one of the most common estate planning tools in estate planning. A living trust usually consists of three parties that consist of the person who is establishing the trust as the Grantor or Trustor. A Trustee is named by the Trust and controls all the assets. The last party to a living trust is the Beneficiaries or the heirs that will receive property from the Trust once the Trustor has died. One thing to note is that in many setups of living trusts is that the Trustees are usually the Grantor as well.
You can establish a revocable living trust where you can end any time you feel the need. Another trust is a irrevocable living trust that once established it can’t be canceled or at least it will take quite awhile to dissolve through the legal system.
People with an estate of $100,000 or more can gain from having a living trust. Estates of $100,000 or more are subject to probate in their state of residence, which can cost the estate heirs anywhere from 1.5%-5% based on the states total net worth. Living trusts can be very handy for people that are subject to estate taxes through a will distribution.
Living trusts can be designed to accommodate different family situations such as people that remarry and have children from other people as well as family members that are trouble. By setting up a living trust people can know beforehand in case something happens to you how you want your affairs to be handled or distributed.
One of the biggest benefits of a living trust it allows you to avoid probate, which is having a legal hearing to resolve all claims and distributing wants left of the estate when you die. With a living trust the Trustee can distribute your assets without any involvement of the court system. This protection of a living trust helps in not having your assets tied up in the often lengthy and pricey probate court. A Trustee has the legal right to distribute the assets to the heirs. So when setting up a living trust you should make sure all your property is designated inside the trust.
One you have a living trust setup you can place money, real estate, life insurance and other personal property inside the trust. If structured right you still maintain control of all your assets so don’t be afraid of this issue. You or someone you trust must be named as Trustee.
Ever who is designated as Trustee will be obligated to carry out your wishes if for some reason you’re able to do it such as unable to care for yourself. The Trustee on behalf of the living trust can still carry out your wishes. The Trustee must carry out your wishes as defined in the living trust.
A living trust can help you minimize estate taxes by eliminating up to $2 million dollars subject to tax as stated in the Estate Tax Credit. The $2 million applies to individuals as well as couples. If a living trust has an A-B provision that if one spouse dies the living trust is divided into two different trusts. Each of the separate trusts will get the $2 million exemption.
The benefit of the A-B provision now will provide up to $4 million is value eliminated from estate taxes.
Everyone with property valued over $100,000 should setup a living trust. Living trusts are easy to setup and don’t require much maintenance once established. One drawback of a living trust is that your estate is not protected from any creditors or a divorce and don’t eliminate estate taxes except the $4 million with the A-B provision or the standard $2 million for individual’s or couples without the A-B provision.