While death isn’t fun to think about, it is still important to plan for those around you after you pass on. Starting a living trust is a great idea to protect your assets and property. A common debate is whether you should start a will or a trust. Today, we are going to discuss the benefits of starting a trust rather than a will.
Two Types of Trusts
First, there are two kinds of trusts. A revocable trust (also called a living trust) allows your assets to avoid probate after you pass, while allowing you control over these assets while you are alive. This trust offers flexibility, so you have the option to get rid of it at any time. It is not set in stone.
An irrevocable trust is more permanent and doesn’t allow you access to your assets while you are alive. It cannot be dissolved or altered until after you die. However, this makes your assets able to pass by probate and reduce the amount of estate taxes. Also, if your trust assets generate income, you are not subject to tax liability.
The Benefits of a Trust
Now that you know about the two types of trusts, let’s look at the benefits of having a trust. Trusts allow you to specify each and every term, so you can limit what distributions may be made and to whom. If you have a revocable trust, you still have access to your assets during your lifetime, so you have control in that aspect, too. Then, the remaining assets will be distributed accordingly after you pass on.
Trusts help your assets and estate avoid probate, meaning that it can be directly distributed after you pass without any taxes, fees or the hindrance from the court. Probate is public record, so a trust allows your assets to stay private. In addition, trusts protect your wealth and estate from creditors or beneficiaries who are not good at managing money or assets.
Revocable trusts allow you to name your family members or other trusted individuals to have authority over your assets if you somehow become unable to manage your estate – wills do not let you do this.
It is important to have either a trust or a will because without them, your property will be distributed according to the state laws that remain out of your control. However, a lot of people find that a trust works better for them and their specific situation. Your age, wealth, and marital status help determine whether or not you need a trust.
If you need help planning a trust, or if you are trying to figure out if a trust is right for you, contact us at Family Law Richard E. Young & Associates!