Living Trust – It’s a term you’re probably heard before. But what exactly is it, and what’s its function in an estate plan?  Don’t know? Rest assured, even those who have living trusts often find them difficult to explain.

To understand how living trusts work, it helps to understand why estate planners use them.  One of the primary purposes of a living trust is to avoid court supervision of your estate at death or incapacity.  If you have a will or die intestate (without a will), it means your estate will likely go through the legal process known as probate. Probate is time consuming and expensive.  It is also open to the public and can take control away from your family.  These same concerns arise if you become incapacitated, in which case your loved ones will need to institute conservatorship proceedings in order to manage your property.  Living trusts can save your loved ones the expense and hassle of going to court.        

So how do they work? It can help to think of a living trust like a bucket that holds all of your stuff: your house, cars, investments, savings, etc.  On the outside of the bucket you write your instructions—what you want to happen with your property when you die or become incapacitated.  As long as you’re healthy, you hold the bucket. You can change your instructions and do anything you want with the property.  It’s still yours. At death or incapacity, the bucket gets passed on to a successor trustee (often a spouse or family member) whose job it is to carry out your instructions.   Because you’ve taken the time to put your property in the bucket (the living trust) and write down your instructions (the trust documents), that person will not need the court’s permission to carry out your wishes.  You’ve already provided the authority and the legal mechanism for doing so.      

For decades, living trusts have been the backbone of most estate plans.  Not only do they save time and money, they provide more flexibility than a will and can be used to reduce taxes and protect your loved ones from creditors and predators. Learn more by scheduling a complimentary consultation with our team here at eLegacy.