What are the advantages of a Living Trust?
The most common reasons people set up a Living Trust are:
- You avoid Probate: If all your property is in trust when you die (or become incompetent), then legally you don’t own anything in your name. This means, if you die, no probate (formal court administration of a decedent's estate) is needed to pass your property on to your beneficiaries.
Or if you become incompetent, no conservatorship (formal court proceedings to administer an incompetent person's assets) is needed to manage your property.In either case, the person that you name in your trust as the successor trustee takes over.
If you die, the successor trustee can distribute the trust property according to your wishes without having to go to probate court to authorize the distribution.
If you become incompetent, the successor trustee can manage the property for your benefit without having to go to court for a conservatorship and without ongoing court supervision.
- Tax Planning: A Living Trust can help avoid or reduce estate taxes, gift taxes and income taxes, too. Your tax savings can amount to hundreds of thousands of dollars or more in some circumstances.
- Control: Like a Will and a testamentary trust, a Living Trust lets you decide specifically what will happen to your property after you die.
You can also use a trust to control how your beneficiaries will spend their inheritance (to reduce the risk they may "blow it" on expensive vacations, cars, gambling, etc.)
- Protection against Creditors: Sometimes trusts can give assets to the beneficiaries and protect those assets from the beneficiaries' creditors.
But a Living Trust does not shelter the settlor from creditors. A creditor of the settlor has the same right to go after the trust property as if the settlor still owned the assets in his or her own name.
- Privacy: A trust is not a public record. So, the general public or anyone who is not a beneficiary does not have a right to know about the assets in your trust.
The only exception is that when you die, the successor trustee must give all of the named beneficiaries and all your heirs at law (the relatives who would have the right to inherit from you if you had died without a Will) the right to ask for and get a copy of the trust.
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