Avoid the probate process
First, what is a living trust? A living trust is an entity created to store your assets. Assets such as investments, real estate property, and family heirlooms. Per Legal Zoom, fifty-five percent of Americans do not have a will before they depart this life. Find more statistics in this piece, “Statistics on Last Wills and Testaments.” A will alone will not help your family avoid the probate process. Each state has their own probate laws. There are four main stages to the probate process:
- Notify heirs and creditors of probate process.
- Assign family representative and probate attorney.
- Appraise estate to determine value.
- Liquidate assets to pay off prior debts and split remaining money.
A living trust stops the probate process. Avoid the probate lawyer fees, the appraisal fees, family arguments and court involvement. Legal Zoom offers a great article on the probate process entitled, “The Probate Process: Four Simple Steps”.
Greater control over your assets
A living trust offers greater control over inheritance. In most cases, the surviving spouse (if applicable) or surviving child(ren) will inherit the estate. Perhaps you do not want them to inherit your estate.
A living trust allows you to make that decision. Let us talk hypothetically. If you own several properties, including a vacation home, rental properties and a primary home, you could decide what asset will pay your debts who will receive the remaining real estate. This a truly powerful tool to take advantage. Ensure your life’s work is handle by your instruction. Thomas and Robert Fross authored a wonderful dialog on this topic entitled, “Wills vs. Trusts: What’s Best For Retirees?”
More protection over your assets
The trust acts as a separate entity to the individual. What does this mean? An individual has a Social Security number (SSN). Most of your personal assets are assigned to your SSN. An irrevocable living trust can and should have a separate tax ID with the IRS. Consider the trust as a new member of the family equipped with its own tax ID, ability to accrue value and pay taxes. Any assets inside of the living trust are often not subject to your personal debts. This is a beautiful thing. Creditors, bill collectors and more can take little recourse against assets not owned by you because they are owned by your trust. Depending on who is designated as the trustee, your assets are protected. For more information on protecting assets, see “Two Types of Trusts: Which Protect Against Creditors?” at EstatePlanning.com.
Remember, your parents need to know that a will is not always enough and steps should be taken to protect their assets as they transition to retirement. We have one more blog in this series by Xavier Estates.