What Are the Benefits of Creating a Living Trust?

What is a Living Trust and How Does It Work?

A Living Trust is a legal tool for estate planning that enables the owner to hold ownership of their assets during their lifetime. Orange County estate planning attorneys explain that the person who sets up the trust is called a grantor. Upon setting up the trust, the grantor transfers their assets and appoints a trustee to manage them to benefit the trust’s beneficiaries.

A grantor can be the trustee, enabling them to retain control over their property during their lifetime. After the owner’s demise, the assets will be divided among the surviving family members according to the instructions. It’s crucial to understand that a trust is a separate legal entity, meaning it can have a tax advantage and other benefits when transferring assets.

What Assets Can be Transferred to a Living Trust?

Trust lawyers in Orange County add that a living trust becomes effective while the estate owner is still alive. Some assets that can be assigned to a living trust include the following:

• Real estate, such as land, homes, and commercial property
• Personal items such as jewelry, antiques, and artwork
• Business interests
• Money market accounts and certificates of deposit
• Mutual fund accounts and brokerage accounts
• Stock and bond certificates
• Money owed to you
• Checking and savings accounts
• Life insurance policies
• Non-qualified annuities

Lawyers advise against putting 401(k) or IRA accounts in a living trust because it can potentially trigger the IRS determining an early withdrawal, leading to hefty penalties and taxes.

Are There Advantages to Creating a Living Trust?

Before establishing a living trust, first evaluate its benefits. Trusts lawyers in Orange County say that apart from letting you control your estate during your lifetime, a living trust also makes the disposition of your estate more manageable for your family after your demise.

A living trust also provides other substantial benefits as follows:

Avoid Probate or Reduce the Probate Estate

The probate process has varying implications, and many things could go wrong. In one common worst-case scenario, the spouse who owns virtually all the liquid assets in their name passes away first. The surviving spouse may experience an interruption in access to funds to pay regular bills while probate is ongoing.

A living trust can help avoid probate and facilitate transition for financial control by the surviving or successor trustee after a grantor’s death. Orange County trust lawyers add that probate can be costly due to legal and attorney fees, which can spiral into several thousands of dollars if probate takes an extended time to complete.

Probate is also a matter of public record, exposing your private family matters to anyone interested in the process. If a probate estate is large, the process can become emotionally charged, creating conflict among the interested parties. A living trust can eliminate all these probate challenges and maintain privacy, especially if you designate beneficiaries.

Controlled Distribution of Assets

The court ultimately decides who gets what when an estate goes through probate. While the distribution may align with your wishes, sometimes it may not, especially if your Will is contested. On the contrary, assets held in a living trust can be distributed in a controlled manner and timing.

For example, you may have a minor child you want to name as a beneficiary. A trust lets you specify the specific purpose or occasion when the assets will be used, such as when they attain a certain age or enroll in college. Such instructions can ensure the inheritance is not used up irresponsibly.

Tax Benefits

The trust terms may provide that assets transferred to a living trust may be structured to minimize estate tax after your demise. In addition to your initial transfer of assets into the trust, you can make a yearly exclusion gift to the fund without paying additional gift tax for the contribution.

Flexibility

A living trust is the road map of your own design. So, you can design it to allow for changes after its establishment while you’re still alive and competent. You can also determine who will succeed you as trustee in the event of your death or incapacity. This allows for a smooth transition of control and oversight in the management of your financial affairs without the need for court intervention. You can also build in a method for you to dispute the implication that you are incapacitated, allowing you to continue having control of your affairs.

Estate planning attorneys in Orange County can add that a living trust is revocable during your lifetime so that if your estate planning goals, circumstances, or people in your life change, you can adjust your living trust. However, the process can be complicated in some cases. Seek the legal guidance of experienced lawyers if you have any questions about the process.

Peace of Mind

When established correctly, a living trust can establish a clear plan to protect all your assets. This is crucial to prevent you from intentionally disinheriting a loved one. It can also help you care for a loved one with special needs in the future, protecting assets from certain people.

A well-drawn trust document can give you peace of mind, knowing your wealth will be managed according to your wishes later. It can comfort your loved ones after your demise, knowing that you’ve laid out everything for them.

A Skilled Estate Planning Attorney Can Help You Establish a Living Trust

After evaluating the benefits of a living trust, you may create one as part of your estate plan. You can start by taking inventory of your property to determine what to distribute to who while deciding who you will choose as your successor. Work with skilled trust lawyers in Orange County to guide you through the legal nuances to prevent future misunderstandings.

The Kiken Group, A Professional Corporation, has knowledgeable estate planning lawyers who can provide in-depth insight into living trusts. We can evaluate your goals and objectives and help you plan your assets accordingly. Call us at 657-286-4782 for a FREE consultation.