Can a Living Trust Help with Your Estate Planning?
If you have been thinking that it is time to do some long-term planning for your estate, you may have run across the term “living trust”. Understanding exactly what it is can be a bit daunting for most of us. A trust is an estate planning tool that names a trustee (person who controls the property placed in the trust), a trustor (the person who places property in the trust), and a beneficiary (the person who gains the property upon your death). A living trust is a bit different, because after you have it set up and legally place your assets into it, you become the trustee, trustor.
Basically, a living trust is a legal document that you can set up. This document lays out your plan for what would happen to your assets, your minor children, and your heirs after your death. One benefit of a living trust is that there is no waiting, or probate period, before the person that you selected as your trustee can follow the instructions you left.
Because you are the trustee of your living trust while you are alive, you are able to manage the assets that the trust holds, even though you are no longer officially the owner. This means that you can do what you want with these assets, whether you choose to buy more, sell some or give them away.
A living trust is very beneficial for those left behind. This is because it allows the stipulations of the trust to be carried out without waiting for a court to complete the lengthy probate process that is required with a will. As a will is a public legal document, details can often be discovered by anyone who is searching for information. A living trust can also help your heirs keep information about your estate private. Instead, the person you have named to be your trustee when you die can make sure that your wishes are carried out as smoothly as possible.
A-B trusts are often mentioned with living trusts. These are a type of living trust that is set up frequently because of the tax benefits it offers. Another name for the A-B trust is the marital and bypass trust combination. With this type of trust, both spouses can use the estate tax exemption when they die, meaning that more assets are sheltered from large federal estate taxes.
A-B trusts can also:
- Shelter any appreciation that happened to assets while they were held in trust
- Keep the assets from creditor
- Make sure the assets can benefit your children from a previous marriage
If a couple has more than $10.98 million in their combined estate assets, it is recommended that they speak with an estate planning professional to see if a living trust is right for them.
While it is true that setting up a living trust costs more than setting up a simple will, it can actually save money in the long run. Some of the costs that you will incur while setting up your trust include fees for transferring titles of assets, fees for lengthy legal documents, fees for transferring bank accounts, stocks and bonds. Some living trusts also require you to pay an ongoing fee for keeping the trust in place. The initial set up cost of the trust, however, will be offset by the savings when your estate is disbursed. For instance, there will be no court costs for probating a will and some estate taxes can be avoided.
Though there is a lot of information available on the internet about setting up living trusts in Texas and the rest of the United States, an estate-planning professional can help you figure out what type of will or trust would be the most beneficial. Make sure that you understand the costs, possible fees and advantages of setting up and maintaining a living trust before you make your final decision.