The Importance of a Living Trust: Tips, Tricks, Do’s and Don’ts:
The importance of a living trust can be overwhelming. Many people have heard of a Living Trust, but few actually know what it is, or why it’s important to have one. In this blog, we’re going to discuss the importance of forming a living trust, as well as discuss the finer points of what a living trust entails, and some of the best practices in forming a living trust.
Living Trusts: The Basics
Before we get into anything else, we need to discuss what, exactly, a living trust is. In a nutshell, a living trust is a document that’s written up in a similar way to a will, but it designates someone to be in charge of your estate (however vast or small) if you’re incapable of managing your own assets or at your death. It’s a revocable document, meaning that as long as you’re mentally competent to change your living trust, you can do so. The only time a living trust cannot be changed is after you pass away. In this way, of course, it’s similar to a will.
One of the biggest differences between a will and a living trust is that, in a living trust, you can name yourself as a trustee. This is especially important to do because for as long as you’re alive, you’re going to want control of your estate. In addition, it’s important to name a spouse as a trustee of a living trust to further protect your assets. (This is especially true in a community property state, such as Arizona.)
Finally, but no less importantly, consider the financial benefits of getting a living trust. A living trust will be useful to most individuals. The state of Arizona has indicated if all your combined personal property exceeds $75,000, your estate will go through probate, which is a time-consuming, costly and public process. Having a living trust not only avoids probate but also allows for some special distribution instructions at your death.
What are some important reasons to get a living trust?
Now that we’ve gone over the basics of a living trust, here is a list of important reasons why you should get one…and the sooner, the better:
- You want to make sure to protect proper interests. This is especially true if you have children that are under the age of 18: adults sometimes have difficulty managing an estate. Do you think your 15-year-old is going to manage any better?
- You want to reduce your estate taxes: while a living trust doesn’t reduce an estate’s taxes per se, a living trust will provide for maximum deductions and credits…which, in the long run, will help you save on your taxes.
- You want to make sure that your estate is OK…even if you aren’t: no one can accurately predict the future, and you never know what could happen to you that will leave you incapacitated. In the event that you should suffer a debilitating illness and can no longer manage your estate the way you want it managed, a living trust will make sure that your wishes are granted.
- You want to avoid probate: as discussed earlier Probate is time-consuming, costly, and public…no one wants any of that. In addition, probate opens up your estate to creditors to make claims and allows potential beneficiary questions the validity of the will. When you establish a living trust, there is a much less of a chance that your instructions will be challenged and overturned. In this way, you still maintain control, even after your death.
What are some of the drawbacks of a living trust?
Of course, not everything is perfect when it comes to a living trust. There are some drawbacks to establishing a living trust, including (but not limited to):
- Your living trust does not “get rid of” your creditors in the event of your demise.
- Your trust is worthless if you do not fund it with your assets
- A trust cost more to setup however you can save by using a Certified Legal Document Preparer.
Ultimately, you will need to talk to a professional to determine what your needs are…and that’s where we come in. For more information about us and our services, contact us today to see what we can do for you.