A living trust is a legal arrangement in which an individual transfers the title of property and assets into a trust where it is held for an individual named as the beneficiary of the trust. The term ‘living trust’ is utilized because the arrangement is created while the trust maker is still alive and it is administered by that individual until their death. Once the individual dies, all of the property and assets held within the trust are made available to the beneficiary according to the terms of the living trust. The trust maker names a trustee who will administer the trust according to the wishes of the trust maker after they are gone.
The main advantage of a living trust is that the property and assets that are placed into it do not have to go through probate court upon the death of the trust maker.
Probate is a time-consuming and costly process which can take months to complete, and the attorney and court fees associated with the probate process can claim as much as 5% of the estate value.
Living trusts avoid probate because they directly transfer the property and assets in the trust to the beneficiary in a seamless and efficient manner. The trustee who is named by the trust maker simply oversees the transfer of property and assets to the beneficiary, and once complete, the living trust is dissolved. This process alleviates the need for probate because there is no need for inventory and to appraise the property or pay any debts or taxes owed on it.
Another advantage of the living trust is that all of the assets and property owned by an individual or couple can be placed into the trust and accessed by the beneficiary while the trust maker is still alive. The living trust can be set up to be dispersed in any manner the trust maker desires, which means that proceeds from the trust can be distributed to the beneficiary in predetermined amounts for a predetermined period of time, or it can be transferred completely upon the trust maker’s death. While alive, the trust maker has complete control over the trust until their death, at which point the appointed trustee takes over administration of the trust and ensures that the assets held within are dispersed in the manner determined by the trust maker.
Unlike a last will and testament, a living trust is not required to be made public after the death of the trust maker because it is never submitted to the probate court. This offers a measure of privacy to the disbursement of an individual’s estate because the details of the trust are not required to be made public. In terms of the last will, the court requires that it be filed upon the death of the individual, which immediately makes the terms of the will accessible through public records. Unless otherwise stipulated by state law, the terms of the living trust are not required to be publicly disclosed.
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