For many, the estate planning process starts with the creation of a will. Your will is the most basic element of your estate plan. It provides guidance on who should inherit your estate and who should take over as guardian of your minor children. Without a will, your local probate court could decide what happens to your estate.
A will may not meet all your estate planning needs, however. It’s possible that your estate or your heirs could face challenges that can’t be resolved by a will. For example, probate costs could drain your assets. Some of your heirs may not be competent enough to manage their inheritance. You could face incapacitation near the end of your life and become incapable of handling your own affairs.
A living trust is one tool you can use to address these issues. Many people assume that trusts are only for those who have substantial wealth. However, the truth is that a trust can be helpful for anyone who wants to protect their assets and leave a legacy to their loved ones. Below is some basic information on living trusts and how you can use one to plan your estate:
What is a living trust?
A living trust is a document that provides legal protection and instructions on your assets and your estate. You and your attorney create the document and name a trustee, who oversees the assets inside the trust and the execution of the document. You then retitle any assets to ownership by the trust itself. Once the document is created and the assets are retitled, all management of those assets must be done according to the trust’s instructions.
Most living trusts are designed to be revocable. This means you can change the trust or even dissolve it while you are still alive. If you decide you no longer want a trust or that you want to adjust the terms of the trust, you have the option to take those steps.
Many people name themselves as trustee. By naming yourself trustee, you can maintain control over the assets while you’re still alive. You would also name a successor trustee to take over management of the trust should you pass away or become incapacitated.
How does a living trust differ from a will?
The primary difference between a living trust and a will is that the living trust offers more control. With a living trust, not only can you specify who should receive specific assets, but you can also instruct how those assets should be distributed. For example, you can state that the inheritance be paid out in annual installments or only after an heir has reached a certain age.
If you have an heir who is unable to manage their own money, you can provide detailed instructions on how their inheritance should be managed. This can be helpful if you have heirs who are minor children or who face challenges that would prevent them from using the money wisely.
A trust can also protect you if you face incapacitation later in life. Conditions such as Alzheimer’s, Parkinson’s and others could threaten your ability to manage your finances. If you suffer incapacitation, your successor trustee could assume control of your assets and make decisions on your behalf.
Finally, a trust can be helpful because it avoids probate, which is the legal process for settling one’s estate. A will doesn’t bypass probate, so your assets could be tied up in court for months following your death. Also, your estate could rack up sizable legal and administrative costs during the probate process. A trust minimizes delays and legal expenses.
Do I need a living trust?
There’s no universal answer as to whether an individual should have a living trust. The decision should be based on your own specific needs and goals. However, if you wish to have greater control over your legacy and offer enhanced protection to your heirs, a trust could be a wise idea as part of an overall retirement income and legacy plan.
Ready to discuss your retirement income, insurance needs and estate planning strategy? Let’s talk about it. Contact us today at Trinity Financial. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
16995 – 2017/9/25