When most people think about how their inheritance will be passed on after their death, they think about writing a last will and testament. But that’s not the only choice you have.
A living trust is another option. Living trusts offer different before- and after-death advantages that a will does not. Most notably, a living trust allows you to avoid probate—the legal process that determines whether a will is valid, and which can often tie up the distribution of your assets.
A living trust may serve your needs better than a will. An experienced trust attorney can consult with you and help you decide which option serves your interests and desires most as you complete your estate planning. The trust attorneys at Wilson & Reives have extensive estate planning knowledge and can help you draft a flexible plan that suits your needs.
What is a living trust?
A trust is a document prepared by a trust attorney that lets you specify to whom, how and when your assets will be distributed after your death. In a trust, you appoint an individual or corporation as a “trustee” to manage your property upon your incapacity or death. This living trust is created and funded by you during your lifetime.
Putting your assets in a trust can provide you with peace of mind, control, privacy and convenience. It also allows you other benefits:
- A living trust can allow someone else to act on your behalf if you become incapacitated and cannot act for yourself
- As a part of your estate plan, a living trust can provide control over the assets left to your heirs
- A living trust allows the trust assets to avoid probate and remain private
- A living trust can be used to avoid separate estate administration if you own property outside your state of residence
A trust involves the following parties:
- The Grantor – this is you
- The Trustee – one or more individuals (or a named corporation) responsible for managing the assets in your trust according to the terms of the trust document. The trustee’s role is to carry out your objectives in support of your beneficiaries. If you draft a revocable living trust, you may be the trustee as long as you live
- The Beneficiary – one or more individuals or entities designated to receive your assets according to your trust
- The Successor Trustee – one or more individuals (or a named corporation) who will become trustee upon the resignation, incapacity or death of the original trustee
What is the difference between a living trust and a will?
Living trusts and wills share some similarities. Both contain your inheritance instructions regarding who gets what, when they get it, and how it’s delivered. You can add or remove assets from both a living trust and a will throughout your lifetime. However, there are a few important ways in which living trusts differ from wills:
Living trusts help you avoid probate
The process of having your will examined and approved by the court can be expensive, which cuts into the assets your heirs receive after your death. Also, by avoiding the probate process, your heirs can receive the assets you leave them more quickly.
Living trusts are private
A will is a public document by virtue of the fact that it is examined in court. A living trust is not. If you would like to keep your assets and their distribution private, a living trust allows you to do so.
Living trusts allow you to control when and how your assets are distributed
Giving assets to beneficiaries who are young, financially irresponsible or who have substance abuse or gambling problems can result in a waste of inherited assets. However, by placing assets in a trust for your beneficiaries, you are able to control when and how those assets are distributed. The trustee is responsible for making decisions based on the terms of your trust document.
Living trusts transfer property differently
While both wills and living trusts allow you to transfer property, a living trust requires you to first transfer the property into the trust before naming the eventual beneficiary. What does this difference mean? You can still use the property in question while you’re alive, but technically you will not be the owner—the trust will own it.
Living trusts require a notary public
To make sure your trust is legal, you must sign it in the presence of a certified notary. You need not do this with a will.
Living trusts cannot name a guardian for your children
This is especially important for parents of small children. Since you cannot name a guardian for your children in a living trust, but you can in a will, many parents work with a trust attorney to create both documents.
What is the difference between revocable and irrevocable trusts?
A revocable trust is the most common type of trust. It allows you the right and ability, as long as you’re mentally competent, to nullify the trust at any time, at your own discretion, for any reason. You can then either create a new one or use other estate planning methods to put your affairs in order. This kind of trust only becomes truly unchangeable when you die.
An irrevocable trust, as the name implies, is a binding document that cannot be changed. A much more complicated document, it’s usually appropriate for individuals with a lot of assets.
The attorneys at Wilson & Reives have extensive knowledge of North Carolina laws and are here to provide you with trusted, effective legal counsel. Contact us today to get the guidance and help you need.