If something happens to me, who has control?
If you and your spouse are co-trustees, either can automatically act if the other becomes disabled or dies. If something happens to both of you, your hand picked successor trustee steps into your shoes and acts pursuant to your directives set forth in the trust.
At disability, the successor trustee manages your financial affairs for as long as necessary. Upon your death, the successor trustee pays your debts and distributes your property according to your instructions. Remember, this can all be done without any probate court intervention whatsoever.
Who can be the successor trustee?
Successor trustees can be individuals such as adult children, other relatives or trusted friends. You can also have a corporate trustee such as a bank.
Advantages of a Living Trust:
- Avoids all probate and related costs – both financial and emotional
- Allows quick distribution of assets to beneficiaries
- Can reduce or eliminate taxes
- Preserves privacy – completely confidential
- Very hard to contest
- Provides effective prenuptial protection
- Inexpensive, easy to setup and maintain
Reasons for having a Living Trust:
A living trust is used to avoid the expense, time and anguish of probate court proceedings. Property transferred by will is subject to administration through probate court. Also, if you become disabled, your assets will come under the control of the probate court.
A living trust avoids all probate and makes sure that your estate plan is carried out with as little effort and expense as possible, while still allowing you to maintain complete control of your assets. It can be amended or revoked at any time prior to your death.
Doesn’t joint-ownership avoid probate?
This method of owning property can avoid probate, but often results in unintended legal results and tax disadvantages. There can be significant tax disadvantages especially when property that has appreciated in value over the years is transferred by his method. Further, there may be an undesirable gift tax imposed at the time the property is transferred. When you add someone as a co-owner of your property, you lose control. You are exposed to creditors of the other owner, including their spouses during a divorce proceeding.
What is a Living Trust?
A living trust is similar to a will. It is a written expression as to how and to whom your assets will pass to upon your death and provides for management of your assets during your lifetime should you become disabled – all without the necessity of probate court involvement. It can reduce/eliminate estate taxes, is extremely hard to contest, and makes an effective prenuptial agreement.
How does a Living Trust work?
A living trust is created during your lifetime, usually for your own benefit for as long as you live, and after that, for the benefit of your family. When you set up a living trust, you transfer all of your property from your individual name to the name of your trust, which you control; such as John and Mary Smith to John and Mary Smith, trustees of The Smith Family Trust.
Legally, you no longer directly own anything (everything is owned by the trust) so there is nothing that goes to probate when you die or if you become disabled.
Is it hard to transfer my assets into my trust?
No, funding the trust is simply a matter of re-titling your bank accounts, bonds, stocks and real estate. Your real estate is transferred by a simple Quit Claim Deed. Your banker and other financial advisors will take care of transferring other assets such as stocks, accounts and bonds. As trusts are becoming so common, they are quite familiar with the procedures to do so.
Do I lose control of the property in my trust?
No, not at all; you keep full control of your assets while you are alive. You are the initial trustee of the trust and as such, you can do everything you could do before. You can sell the assets, mortgage the assets, make changes to the trust or even cancel your trust at any time. Nothing changes except the name on the titles.
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