What is a living trust?
Creating a “living trust” is a very effective way to ensure that property and assets owned by the decedent are transferred to his or her heirs according to the decedent’s wishes. Having a living trust helps to protect individual and family privacy because the terms of a living trust are not disclosed to the public, unlike a will. Additionally, living trusts usually bypass the probate court system.
Setting up a living trust allows for quick distribution of property and assets, whereas those that go through the probate process can take months or even years to distribute. There are often a number of tax benefits to having a living trust, especially for those with a large number of assets.
Keep in mind that although there are some advantages to using a living trust instead of a will, there are also disadvantages. One disadvantage is the high cost of setting up a living trust as opposed to drafting a will. If you are thinking about creating a living trust instead of a will, we highly recommend that you first meet with a qualified attorney to find out which option will work best for you.
The legal name for a living trust is a revocable inter vivos trust. “Inter vivos” means that it was created while the decedent was alive and “revocable” means that it can be revoked or changed by the decedent at any time before he or she dies. For purposes of a living trust, the decedent is called the settlor.
In a living trust, the settlor manages his or her property before and after death, and dictates how their assets and the income earned by the trust are distributed after death. If the settlor becomes incapacitated or disabled, the trust is in place to manage the financial affairs, usually by a successor settlor. In this situation the trust provides a comprehensive disability plan.
A pour-over will is necessary to distribute any property that is acquired in the name of the settlor after the living trust was established.
However, a will is still needed as a backup for anything that does not pass through your trust, such as recently acquired property.