When you fund a living trust, you convey assets into the trust. You make the trust the new owner of the property by changing the ownership registration on the title or deed of the property. In the trust declaration, you can list the property, or you could list the property that you are using to fund the trust on a separate document called a schedule.
The person who administers a living trust is called the trustee, and the beneficiary is the individual that can receive monetary distributions from the trust. If you establish a revocable living trust, you can act as the trustee while you are alive, and you can also act as the first beneficiary. Since you can assume these roles and revoke the trust entirely if you want to, there is no loss of control when you establish and fund a living trust.
One of the benefits that you realize if you use a living trust as an estate planning tool is the facilitation of time efficient asset transfers after you pass away. Under state laws, a will must be admitted to probate, and the probate court supervises the administration of the estate as the property is being prepared for distribution to the heirs. The heirs receive nothing during this interim, and a simple case will usually take close to a year.
On the other hand, assets in a living trust can be distributed to the secondary beneficiaries that you name to succeed you outside of probate. As a result, the beneficiaries can typically start to receive distributions in a more timely fashion.
If you maintain direct personal possession of your property and facilitate postmortem transfers through the terms of a will, you would be leaving lump sum inheritances to the inheritors. This can be disconcerting if you are concerned about the money management capabilities of a loved one.
With a living trust, you do not have to instruct the trustee to distribute everything all at once after you pass away. You could allow for measured distributions over an extended period of time.
Another benefit is the ability to address possible incapacity. Many elders become unable to handle their own finances at some point in time, and you may be surprised to hear that Alzheimer’s disease strikes around 45 percent of people who are at least 85 years of age. When you have a living trust, you can empower a disability trustee to administer the trust if you ever become incapacitated.
Free Living Trust Report
If you would like to obtain more detailed information about the value of living trusts, download our in-depth special report on the subject. This report is absolutely free of charge, and you can click the following link to obtain access to your copy: Living Trust Report.