Understanding Living Trusts
As you grow older, you’re starting to think about your future and how you’ll protect your loved ones after you’re gone. That’s where estate planning comes in. By having the right documents in place, you can ensure your assets are safeguarded and you are looking for out for your family. One of the crucial elements of an estate plan is a living trust. Before creating one, you’ll need to go about understanding living trusts and what purpose they serve.
Entz Burton & Associates, estate planning lawyers, have assisted Oklahoma families and family-owned businesses with estate planning and business law for over 30 years. Reach out to us today to schedule your free consultation and learn if you need a living trust.
What Is a Living Trust?
When going through the estate planning process, you may have heard of a living trust. This is a trust or legal document that you use to name a trustee, who is handed the responsibility of managing your assets for your eventual beneficiaries. When you pass away, your assets are transferred to your beneficiaries, and you can avoid the costly and time-consuming process of probate.
Living trusts, which can decrease or eliminate estate taxes, are revocable or irrevocable. With a revocable trust, you can modify it at any time, of course, up until your death. You can buy and sell assets or cancel your trust if you want to. Most people will choose a revocable trust just in case they need to make modifications. For example, if someone names their spouse as a beneficiary, and their spouse passes away before them, then they can designate another beneficiary instead.
It’s easy to transfer assets into your trust. Usually, you’ll just need to change the titles on your bank accounts, insurance, real estates, investments, and any additional assets with titles. Living trusts can also contain assets without titles, like clothes, furniture, art, and jewelry. The assets will stay in the trust until the beneficiaries reach the age where you want them to inherit the assets. For example, if you are naming a grandchild as a beneficiary, you can state that you don’t want them to receive any assets until they turn 18. Or, you can set up a trust for a loved one with special needs.
An irrevocable trust is one that you cannot change once you’ve set it up. People use an irrevocable trust if they are deep in debt and have creditors coming after them, or they are in a profession, like the law or medicine, where they are susceptible to being sued. An irrevocable trust will protect their assets in these situations.
Why It’s Important to Avoid Probate
Living trusts can be beneficial to anyone. Your net worth or the amount of assets you have doesn’t matter. The goal of a living trust is to easily transfer your assets to your beneficiaries. If they don’t have to go through probate – which is a court-supervised proceeding that could take months or years and cost your loved ones money – you’re saving them time, energy, and resources.
During probate, assets are typically frozen so that inventory can be taken. This means that nothing can be sold or distributed without permission from the court and/or executor. If your loved ones need money, they need to request a living allowance, but this request could always be denied.
If you own property in more than one state and don’t have a living trust in place, then your family will have to go through the probate process in those states. Probate differs from state to state, making it even more complicated.
Plus, while living trusts are private, probate is public. This means that any interested party is able to see what assets you had, who you owed money to, who is going to receive your assets, and when they will receive them. If you only have a will in place, then a disgruntled family member or anyone else who knows about your passing may come and try to dispute your will. This could not only create drama amongst your loved ones, but could prolong probate as well.
Setting Up Your Living Trust
When setting up a living trust, it’s critical that you do so with the help of an estate planning attorney. This is not something that you can do on your own by printing an online form and filling it out yourself. There’s always a chance that you may do something wrong since you don’t know the ins and outs of the estate planning process, and that could have a very negative impact on your loved ones. You won’t even know it because you’ll be gone, giving you absolutely no control over your situation.
You may be concerned about the cost of creating a living trust. While it is more expensive than a will, you will save time and money by avoiding probate. A living trust is an investment in your loved ones’ future, and ensures that your wishes are fulfilled.
You might be wondering if you still need a will. It’s a good idea to have a will in place as a safety net, just in case you forgot to transfer an asset into your living trust. When you pass away, the will takes the forgotten asset and then transfers it into your trust. The asset could have to go through the probate process at first, but it will be distributed as part of your living trust. Additionally, it’s a good idea to have a will if you are the parent of young children. In your will, you can designate a guardian for your children should you, and their other parent, pass away.
Even though many people wait until they are senior citizens to set up their living trust, it’s a good idea to do it sooner rather than later, especially if you have children. You don’t want to make rushed decisions when you’re older or when you don’t have the clarity that you used to. As you grow older, you could be more vulnerable to people who don’t have your best interests in mind, too. You can avoid these issues by starting the estate planning process now.
Contact Entz Burton & Associates
If you need help creating a living trust, then get in touch with Entz Burton & Associates today for your free consultation. Call us at 405-773-9800 or 800-633-7230, or contact us on our website. We look forward to hearing from you and helping you with all your estate planning needs.
Attorney J. Michael Entz at Entz Burton & Associates is an experience lawyer in estate planning law, business formation and asset protection serving the families in Oklahoma City and Weatherford office.
