A living trust is a legal document that allows individuals to transfer their assets into a trust during their lifetime, with the aim of managing and distributing those assets upon their death. While not everyone needs a living trust, there are certain situations where it can be a valuable estate planning tool.
Here are some scenarios in which establishing a living trust may be beneficial:
One common reason to establish a living trust is to avoid probate. This process occurs to distribute a deceased person’s assets to their beneficiaries. It can be time-consuming, expensive and public. Placing assets in a living trust can be transferred to beneficiaries without going through probate, ensuring a smoother and more private wealth transition.
Continued asset management
Another consideration is the desire for continued asset management. A living trust allows individuals to appoint themselves as trustees, giving them control over the assets placed in the trust. In incapacitation, a successor trustee can step in and manage the assets on the individual’s behalf. This can be especially beneficial for individuals who want to ensure their financial affairs are properly handled if they cannot do so themselves.
Multiple state property ownership
For those who own property in multiple states, a living trust can help avoid ancillary probate. Ancillary probate is the secondary process in each state where the property is owned. By transferring property to a living trust, individuals can potentially bypass the need for ancillary probate, simplifying the distribution of assets across different jurisdictions.
Providing for minors or special needs individuals
A living trust can be an effective tool if an individual wants to provide for the long-term care of a minor or someone with special needs. Living trusts can be created to ensure the beneficiary has ongoing financial support.
Establishing a living trust depends on an individual’s unique circumstances and goals. Knowing your options and rights will help determine if a living trust is necessary.