Estate planning involves far more than deciding how to distribute assets after a person’s death. One important tool – a living trust – can help protect a person’s assets while they are alive and provide for the distribution of those assets after their death.
A living trust
As its name suggests, a living trust is established during a person’s lifetime. The trust’s creator, known as a grantor, transfers assets into the trust and names a trustee, who is responsible for managing the trust’s assets.
The grantor can also name themselves as trustee during their lifetime and name a successor trustee to assume control upon the grantor’s death.
The trust must also name a beneficiary or beneficiaries, who will receive proceeds from the trust. Importantly, a grantor can name themselves as beneficiary during their lifetime while naming their family members as beneficiaries upon the grantor’s death.
Advantages of a living trust
The primary advantage of a living trust is that it enables a grantor to control their assets and receive payments from the trust while living.
After the grantor’s death, the trust will provide for disposition of the assets to the grantor’s family members or other named beneficiaries, thereby avoiding the time and expense of probate proceedings.
Compared to a will, a living trust also gives a grantor greater control over the distribution of assets upon death. For example, if a beneficiary is young, the grantor may provide for the release of trust proceeds over a number of years or when the beneficiary reaches a certain age.
A living trust also offers greater privacy than probate and may protect trust assets from creditors.
Establishing a living trust
Living trusts offer multiple advantages and options. It is important to seek advice from a knowledgeable professional to understand options and ensure the trust accurately reflects the needs and desires of a grantor. Establishing a trust requires careful drafting and can get complicated for those unfamiliar with estate planning, so those considering a living trust should consult with an experienced attorney.