When you hear the words "estate planning," you may assume this is only an issue you need to face if you're older, or that it is a problem reserved for the wealthy. However, no matter your age or how much money you have in the bank, it is important to protect your assets and loved ones from unnecessary heartaches, squabbles and costs after you're gone.
One of the best options for many people is a living trust. You may be familiar with the idea of a trust or will but not sure what exactly a living trust is and if it is the best option for you and your family. Here are a few frequently asked questions you might have about living trusts.
What Exactly Is a Living Trust?
When a trust is created while the individual, or grantor, is still alive. The grantor can put any assets in the trust, including the money in their bank account, their home or retirement plan, and the funds are managed by an appointed trustee.
As a grantor, you can act as your own trust and beneficiary, or the person who is entitled to retain the assets located in the trust. A joint living trust can also be established and is typically utilized by a married couple. If the grantor of the trust is also the trustee, the responsibility of acting as the trustee is transferred to another individual, such as a sibling, spouse or child, once the grantor passes away.
Are There Benefits to Living Trusts?
As you learn more about estate planning, chances are you might wonder if establishing a living trust is the best option for you or if you should simply create a will. Having a living will is often necessary, but you shouldn't assume that a living trust is superfluous.
For example, if you establish a living will, any of the assets contained within will transfer directly from the grantor to the beneficiaries. This means your beneficiaries will not need to deal with the hassle and extra expense that is associated with probate court. When you involve probate court, the assets found in a living will become part of public record.
However, a living trust should not be used as a replacement for a living will. Instead, the grantor can name the benefactors of the living trust as the beneficiaries of a living will. This will help ensure that any assets that aren't placed in the trust are transferred to the beneficiary.
Many individuals often create a living trust to avoid estate taxes. In California, you will not need to pay estate taxes on estates that are worth less than $5.4 million. However, be aware that if you live in California and have an estate that exceeds the $5.4 million, you will need to pay a hefty estate tax. This fee can be avoided if you create a living trust.
Where Do I Begin?
When you are ready to create a living trust, the best first step is to contact an attorney. Your attorney can help you understand the complexities involved in creating a living trust, including determining the ideal trustee, which assets to place into the trust and who to name as the acting trustee after you pass away.
Once the trust documents are authored, the grantor must sign them in front of a notary public. Control of the assets named in the living trust is then transferred to the trustee.
For many individuals, creating a living trust is the best way to control and protect their assets and ensure that their loved ones and protected after they pass away. If you have any further questions about living trusts, don't hesitate to contact Steve C. Benton, Attorney at Law.