When most people think about estate planning, they think about a last will and testament. And, yes, for many people, a will is the centerpiece of an estate plan, a chance to secure their legacy and pass their hard-earned assets down to their loved ones. But because wills won’t work until a potentially cumbersome court process is completed, a will may not be the best option when it comes to administering estates. Another arrangement, known as a living trust, may make much more sense.
What is a Living Trust?
A living trust is a legal agreement in which you arrange for a trusted individual (your Trustee) to manage your assets and distribute them to your loved ones after you’ve passed on. In most living trusts, you start out as the initial Trustee and remain Trustee of your estate as long as you remain of sound mind and body. Living trusts are especially useful as a protective tool in case you should become incapacitated or otherwise unable to make your own decisions. You see, the trust contains instructions so that, should you no longer be capable of managing your trust yourself, it easily transfers to a new trustee. This trustee is selected by you and provides detailed instructions for how this new trustee is to manage your assets. After you pass on, the trustee will then distribute your assets to your loved ones, pay off any debts, and administer the trust in accordance with your instructions.
The majority of living trusts are revocable. With a revocable living trust, you maintain access and control over the assets in your trust and are able to change the provisions of the trust, including naming new beneficiaries or new trustees to better fit your needs over time. When asset protection or advanced tax planning is required, an irrevocable trust can often be the solution. Though similar to revocable trusts in many ways, in order to achieve the desired goals of tax minimization and asset protection, irrevocable trusts may restrict not only access to assets but also control of the assets it contains.
Will vs. Living Trust – Which to Choose?
The differences between the operation of a will and a living trust at your death are not in how your estate will be distributed, but rather in the administrative hurdles faced by your agent. When you die relying on a will to distribute your estate, the executor named by you in your will cannot act until the will has been admitted to probate by a judge, giving your executor the authority to act. In contrast, when you die relying on a living trust to distribute your estate, the trustee that you have named may act immediately without the delay of a court process. The distribution instructions may be identical, but an executor has more to deal with prior to following your instructions than a trustee.
This probate process can be both time-consuming and costly. Because probate proceedings are open to the public and can require publication, a family’s privacy is better protected with trust planning. Even though living trusts are generally more expensive and require more work to put in place than a will, the additional costs associated with probate requirements required with a will plan, generally make will planning more expensive than trust planning.
An option to consider when drawing up an estate plan is conditional giving. Conditional giving is a way to protect your assets by placing conditions on when and how your beneficiaries will receive distributions. For example, you may wish to have a loved one reach a certain age before they receive their inheritance to ensure that they will be mature enough to responsibly manage this legacy. Conditional giving can be included in both a trust and a will.
Whether you choose to set up a living trust or draw up a will ultimately depends on your circumstances. Though trusts avoid the costs and public notice of probate proceedings, there are situations where a will may be a better fit. Speaking with an experienced estate planning lawyer can help you determine which option is best for you.
Contact the Estate Planning Law Group of Georgia
If you have any questions about setting up a living trust or about any other aspect of estate planning, the attorneys at the Estate Planning Law Group of Georgia are here to help. We have many years of experience helping our clients build their legacy and pass it on to their loved ones. Give us a call today at (770) 822-2723 or fill out the form below and get started today.
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