A Living Trust (a.k.a. “Revocable Trust”) is a document that dictates how your personal business will be handled upon your death (or incapacitation, such as a coma) and who is responsible for handling your personal business.
A living trust usually contains your major assets, such as your home, savings account, investments, automobiles, etc.
There is an excellent book entitled Understanding Living Trusts. You will find it very useful to determine if a Living Trust is best for you and your own unique situation. Here is some information from that book:
As the “Trustor”, you transfer title of your assets from your name to the name of your trust. (If your name is “Bob Smith”, your trust would probably be called the “Bob Smith Family Trust.”) You assign yourself as the primary “Trustee” and then a list of alternate Trustee’s to succeed you and manage your trust in the event you can not. Adult children are typically named alternative Trustees.
Then, in the event of your death or incapacitation, your first alternate Trustee takes over to manage your affairs, until your final expenses have been paid and remaining assets have been dispersed according to your wishes. You can change your list of trustees and the assets included in your trust at any time, as long as you can speak for yourself. (This doesn’t mean that you cannot change things if you lose your voice! This simply means that as long as you are not “incapacitated,” you can change your trust as it suits you.)
Advantages to holding title in a Living Trust:
The primary advantage of having a Living Trust instead of a traditional Will is avoiding probate cost and time. When someone passes away with only a Will, sometimes the entire estate is tied up for years in Probate court. The process known as “probate” is where a government attorney reviews the Will, allows people the opportunity to contest the Will, and, if the will goes uncontested, “approves” the disbursement of the estate.
However, even if there are no contests to the Will, probate can be very expensive regarding legal expenses and government fees. The Living Trust does away with all that. This Living Trust Kit can help you prepare your living trust documents and to help your attorney to understand exactly what you want. With the Living Trust Kit (on the right), you can easily create your own trust and if no one contests the administration of the Trust, everything can be disbursed, as you wish it to be, immediately after your death. This makes a difficult time a little less difficult for your loved ones, as they can avoid probate altogether.
Some other advantages to a living trust:
Privacy. When a decedent dies with a living trust, the provisions of that trust usually do not become public, as with a Will.
Litigation is strongly discouraged by a living trust. In other words, a Will is far easier to “contest” than a living trust.
A married couple with a living trust can reduce or eliminate federal estate taxes by setting up an Exemption Trust. While both are alive the assets remain in the revocable living trust. Upon the death of a spouse, the trust is split into two trusts: the survivors trust and an exemption trust. (For tax purposes, the surviving spouse and the exemption trust are two separate taxpayers.)
Some Disadvantages of a Living Trust:
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