5 Reasons You Should Have a Living Trust

You might feel overwhelmed when it comes time to consider how you want to divide your assets when you pass, but doing it when you’re healthy is important for maintaining control over what happens. Consulting a trust lawyer can also help you rest assured that you have a clear plan for where your assets end up and under what conditions.

What’s a Trust?

When you set up a trust, you draw up a legal agreement that lets you protect and distribute your assets to beneficiaries of your choice. If you put your assets into a trust, you can maintain control over them and avoid a lot of the high fees associated with wills, not to mention the probate process. If you don’t set up a trust, your assets might not end up distributed the way you wanted.

Trusts can look very different depending on the assets involved, but in general, there are two types – revocable and irrevocable. Also called living trusts, revocable trusts, just like the name suggests, can be taken away at any time. This type of trust allows people to maintain complete control over the trust while they are alive. In the event that they change their mind about the distribution of assets, they can dissolve the trust. Revocable trusts are subject to estate taxes. On the other hand, irrevocable trusts can never be altered and are not subtext to estate taxes. Irrevocable trusts are typically created for the benefit of descendants. A knowledgeable trust attorney can help you determine which type of trust meets your needs.

5 Reasons to Have a Living Trust

1. It Can Go Into Effect While You’re Alive. A last will and testament can only go into effect after you die. This can cause complications in the tragic event that you become mentally or physically incapacitated. If you don’t have a trust, the court can decide what to do with your assets and take some control away from you. However, if you choose to set up a trust, you are choosing to retain control over your assets while you are alive. This kind of foresight will mean you are prepared for unpredictable situations, like becoming incapacitated.
2. You Can Avoid the Lengthy Process of Probate. If you have a will, then when you pass away, your estate might have to go through what is called probate, the legal process of validating the will and distributing the assets. This can be a tedious experience for your family, as it takes at least nine months, but often longer, and frequently leads to conflicts like debates among family members and heirs. For example, if someone calls the validity of your will into question, it could create a huge headache for your loved ones while they are grieving. Also, keep in mind that probate is public, which means that anyone who is interested can access information on your estate; your family will have no control or privacy. If you set up a living trust, you would have already transferred the assets to the trust and, therefore, not be their owner at the time of your death. This would make probate unnecessary, and your beneficiaries would be able to access the assets you set up for them without a hassle.
3. You Can Minimize the Cost of Estate Taxes. If you transfer assets to a living trust, you might be able to reduce the taxable value of your estate. Depending on your unique circumstances, you might even be able to eliminate them. This can be complicated, but the right estate planning lawyer can help see if this is possible for you.
4. You Can Protect Your Loved Ones. Trusts give you the power to distribute your assets to people you love, like nieces, nephews, or your own children. You also have full control over the level of access your beneficiaries have to the assets. For instance, if you have young children, you can limit the amount of access they have to the money until they reach adulthood.
5. You Have Control Over Your Own Assets. With a trust, you will not only be able to select who your assets go to but how they get there and what they’re for. For instance, you can say that your child is only able to use the money set aside for them in the trust for higher education or that they can’t access that money until they reach a certain age of your choice.

FAQs

Q: Why Should I Set Up a Living Trust?

A: If you set up a living trust, you can control your assets in the unfortunate event that you become incapacitated, which you can’t do to the same extent with a will. You can also help your family avoid probate, minimize estate taxes, and decide precisely who is entitled to your assets and under what conditions. Although you might fear a trust is complicated to set up, a lawyer can help. In the long run, an attorney can ensure your loved ones avoid confusion and hassle when you pass on.

Q: What Is the Downside of Setting up a Living Trust?

A: Some people might choose to set up a will but not a living trust because of the stigma about trusts being more expensive and more complicated. However, a trust lawyer can guide you through all the steps of setting up a trust to make it as simple and stress-free as possible.

Q: What Is the 5 by 5 Rule in Trusts?

A: If you’re setting up a trust with a lawyer, you can choose to add the 5 by 5 clause, which allows your beneficiary to withdraw 5% of the trust’s fair market value every year, or $5,000. You might want to do this if you are concerned about the beneficiary’s competence. You might also consider permitting flexibility for the beneficiary to use some money from the trust every year for any reason. The 5 by 5 rule can also reduce capital gains taxes from the trust’s assets.

Q: What Are Three Specific Advantages of a Trust Over a Will?

A: One advantage of having a trust is that the trust can avoid the lengthy and stressful public probate experience. A trust can also help you stay in control of your assets if you become incapacitated but are still alive. Additionally, a trust grants you the flexibility to articulate specific conditions for the distribution of your assets, like what age the beneficiaries can access the money and for what purposes.

Seeking the Help of An Experienced Trust Lawyer?

We know how confusing it can be to set up a California trust, and we can’t stress enough how important it is to have a lawyer help you navigate the legal complexities involved. Robert G. Petrovich, Attorney at Law, has over 30 years of experience navigating clients and can help you craft a detailed plan for your estate too. Contact the office to get started protecting your assets today.