Why Is an Estate Plan Important?
Use of a Living Trust
What is a Living Trust?
What is a living trust, and what kind of protection does it offer? The article “An important part of protecting your assets and those you love” from The Times explains how this estate planning tool works.
A living trust is a legal entity created to make it easier to transfer assets like real estate property and other assets after death. Assets held within trusts pass directly to beneficiaries according to the terms of the trust. They do not go through probate.
Funding the Trust
Once a trust is created, it must be funded, which places assets within the protection of the trust. These can include bank accounts, investments, real estate, vehicles, jewelry and other personal property of value.
Trustee and Successor Trustee
Protection of Real Estate Properties
Probate can take a long time. During that time, a building needs to be maintained, property taxes must be paid and insurance coverage needs to continue. Making changes to the property or even renting it out during probate may require permission from the court. If an expensive repair needs to be made, like a heating system or a new roof, and the estate is still in probate, someone has to make sure the repairs are done and pay for them.
Certain assets pass directly to beneficiaries. These include life insurance proceeds, Pay on Death (POD) bank accounts and retirement accounts, like IRAs and 401(k)s. Others, like the family home and personal property, could be bound up in probate for months, or years.
A living trust does more than bypass probate. It allows you to declare how you want your assets to be distributed and when. If you don’t want your children to receive a lot of money in one lump sum at a young age, it can break out the distribution over decades. A trust can also set life goals, like graduating from college, before funds are released.