A living trust is a tool that helps ensure that your heirs receive the assets that you want them to have. While they work similarly to a will, the big difference between a will and a living trust is found in the fact a will won’t go into effect until you have passed away, while a living trust (preferably a living revocable trust) goes into effect immediately. During your life, you are still in charge of your trust and the assets contained in it, and once you have passed away, the trustee whom you have designated becomes responsible for handling the assets in the trust according to your wishes.
A living trust is a document that contains information about at least one asset that you own, a beneficiary who you want to leave that asset to, and a trustee who will handle the transfer of that asset in the event of your incapacitation or death. There are two different types of trusts, revocable trusts and irrevocable trusts. Revocable trusts can be modified or even canceled by you (the granter) while an irrevocable trust cannot be canceled out or modified without the consent of the beneficiary. Most grantors choose revocable trusts so they maintain control over their assets until the asset is ready to be transferred to the beneficiary.
There are some cases where an individual may not need a living trust. That is not because they aren’t a useful tool for estate planning. Instead, it is because there are certain assets that cannot be included in a living trust and others that simply don’t belong in one. Items that cannot or should not be included in a living trust include:
If the only assets in your estate fall under those categories, there is obviously no need for you to have a living trust. However, if your assets include real estate, cash accounts (such as money markets and CDs), stocks and bonds that you hold certificates for, business interests, some life insurance benefits and more, a living trust can prove to be very useful.
In order to set up a living trust, you will need to take the following steps:
Setting up a living trust ensures that your loved ones, favorite charity, or any other entity that is dear to you can benefit from your hard work. The process behind creating a living trust can be as simple or as in-depth as you want it to be. Depending on the amount of assets that you own and your plans for them, you have the potential to create generational wealth within your own family. Of course, if you don’t feel comfortable setting up a living trust on your own, working with an estate planning attorney or another industry professional is a great option.
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.