1. What is a Living Trust?
There are a variety of living trusts, however, notwithstanding special circumstances; the revocable living trust will likely meet your needs. This type of trust may be amended or revoked at any time by the trustor, as long as the trustor is still alive and competent. After the trust is created, all assets (your home, bank accounts and stocks, for example) are transferred into the trust. The trust is administered for your benefit during your lifetime, and upon your death, such assets will be transferred to your beneficiaries per the trust documents.
2. Do I Need a Living Trust?
Having a living trust is important in the event of an accident or sudden illness as it will help to ensure that your assets will be managed according to your wishes and your designated beneficiaries can receive your assets. Generally, a couple with a house and/or with children may benefit with a living trust as their assets and their heirs can avoid a timely and costly probate process. The assets held in your living trust could be managed by the trustee and distributed according to your directions without court supervision and involvement. Because the trust would not be under the direct management of the probate court, your assets and their value (as well as your beneficiaries’ identities) would not become a public record.
3. Why Do I Want to Avoid Probate?
If your assets (those in your name alone) are not in a living trust when you die, or do not otherwise pass by “beneficiary designation,” and the total of such assets exceed a specified threshold (currently $150,000), they would be subject to probate. Probate is a court supervised process for transferring assets to the beneficiaries listed in one’s will.
After your death, a petition would be filed with the court (usually by the person or institution named in your will as the executor). After notice is given, a hearing would be held. At the hearing, your will would be admitted to probate and an executor would be officially appointed. An inventory of your assets would be filed with the court and notice would be given to your creditors so they could file claims. The process would end once the court approved a final distribution of assets.
Probate can take more time to complete than the distribution of property held in a living trust. In addition, assets tied up in probate may not be as readily accessible to the beneficiaries as those held in a living trust. The cost of a probate is often greater than the cost of managing and distributing comparable assets held in a living trust.