A living trust is a trust that allows you to put your assets into a trust while you are still alive. Having the trust as revocable allows for flexibility. Naming a trusted person to be the trustee has them handling your living trust the same as a property broker handling your trust. You name a trustee so they can handle your assets for the benefit of you and/or your family. You can name an attorney, a trusted friend or even yourself as a trustee. It is usually recommended to name another person in case something happens to you and someone needs to handle your assets.
A living trust and joint tenancy/survivorship are the two ways to avoid probate. With having a living trust in place, the trustee already owns your assets and can do with them what was already laid out in a will. Probate’s purpose is to determine how to dispose of your property after you pass away. This is already taken care of with a living trust.
How to set up a living trust varies from state to state. The benefits of using a living trust depends on how much you own and what works for your situation. A living trust is a document that says that your property is held in trust for the benefit of you and your family or who you want it to benefit. You list your assets on a document called a schedule. Property registration has to be changed from your name to the trusts name. You can add and delete property from the trust when ever you need to. If you make yourself the trustee, you have to make sure you sign in the trust name, not your own name.
When property is put into a living trust, the trust is the owner while, you still retain rights to use and enjoy the property. According to the tax authorities, the property still belongs to you, the grantor, for tax purposes. If you receive income from the property, you will still have to report the earnings on your federal taxes. Usually, the trust operates and files it’s own income tax statement unless, the trustee is yourself.
You can name any person you wish as a trustee as well as, name an alternative trustee. An alternative trustee is usually named in case the original trustee becomes incapacitated for any reason. It is a good idea to have an alternative trustee named since, anything can happen suddenly. The alternative trustee can take over the trust without major hassles if one was not named.
A revocable living trust gives you the right to manage your property, no matter if you are the trustee or not. You can make changes to the trust at any time you wish without the trustee. If you were to die, then the alternative trustee would dispose of your property as the trust sets out.
Living trusts can work in the way that a will does. You can specify who you want to receive what after you die. You can leave well laid out instructions as to what you want done with the property in the trust. You can even have the trust managing property for children and grandchildren until they are grown to make sure they are cared for until adulthood. It is helpful to name not only beneficiaries but, alternative beneficiaries in the event the beneficiaries die before you do.
Living trusts can avoid probate and executor fees in the event of the person’s death. You can’t avoid all estate fees and taxes using a living trust even though, you can avoid some fees. It is also helpful if you have property in more than one state.
A drawback of a living trust is, if you have children that are not adults yet, you cannot name a guardian in a living trust. You can however, set a means to provide for your minor children in the even of your death. You can have title problems with putting property into a trust, for instance you automobile. Living trusts are not automatically revoked or amended in the instance of a divorce.