Setting up a living trust may allow you more control over the distribution of your property to your heirs and beneficiaries after you pass away. Although difficult to consider one’s own mortality, you, like others, probably want to provide for the care of your loved ones.
Understanding what a living trust is and how it works may help you decide if using this type of estate planning tool will serve your needs and goals.
Holding and passing on assets
A living trust holds the assets you place in it and distributes them as specified upon your death. According to The Superior Court of California for the County of Santa Clara, this type of financial planning tool goes into effect during your lifetime. You may retain the right to use and control over the trust-held property by naming yourself the trustee and beneficiary until you die or become incapacitated.
Many choose to set up living trusts because they let them avoid probate. If you establish a living trust, all the property held is no longer in your name. Therefore, your estate likely will not require formal court administration to pass your assets on to your beneficiaries. Rather, they will get distributed according to your wishes by your named successor trustee.
Unlike probated wills, the public does not have access to trusts. As such, nonbeneficiaries, as well as the public at large, will not have the right to know about or view the property your trust holds.
Planning for taxes
Using a living trust to pass assets to your beneficiaries allows you to plan for and avoid some taxes. Without such a tool in place, estate, gift, income and other taxes may take away from what you intended to leave to your loved ones. Depending on factors, such as the size of your estate and how your structure your plan, you may save up to hundreds of thousands of dollars by setting up a living trust.
You work hard over your lifetime to amass assets and build your estate. Estate planning tools, including living trusts, may let you preserve and pass on this property on your terms.