Ways a Living Trust Can Help Preserve Assets

What is a living trust and how can it be useful in financial planning?

A living trust is a legal written document which partially substitutes for a will. By employing a living trust, your assets, including your bank accounts, home, and other investments, are put into a trust designed to be beneficial to you during your lifetime and to be transferred to your beneficiaries after your death.

In most cases, the trust is established so that you serve as your own trustee, maintaining full control over your assets during your lifetime. It is also possible, and most often desirable, to designate a successor trustee (person or financial institution) to manage the trust’s assets if you become incapacitated. It is important to note that you can alter or dissolve  a revocable living trust at any time as long as you remain competent to do so. Also, in cases where a named trustee takes the position over, he or she is held to high standards and cannot make personal use of the trust’s assets.

Reasons for Establishing a Living Trust

There are several important reasons for creating a living trust, including that:

  • It can ensure your assets will be managed as you desire, even if you become incapacitated
  • It will make certain that your appointed trustee will take care of taxes, debts, and distribution of assets at the time of your death, much as an executor would
  • Arrangements after your death can be made without court supervision or approval
  • A living trust prevents probate in the case of a fatal accident or other sudden death
  • If anyone contests your decisions after your death, a trust will hold up much better than a will

Even with all these advantages, there are a number of situations in which establishing a living trust is not necessary nor desirable. Young married couples without children who are one another’s sole beneficiaries do not necessarily need a living trust. The possibility that both spouses should die simultaneously, however, should be considered. Also, if you believe that court supervision over your estate will be helpful, or even essential, a living trust is not for you. In general, if your assets are not significant (e.g. under $150, 000), you probably do not require a living trust.

As a rule of thumb, the greater the value of your estate, the more beneficial a living trust becomes. While drafting a will costs less initially, having a living trust in place cuts future court costs for probate, saving your estate money in the long run.

As you proceed with your estate planning, it is essential to have an experienced and highly competent attorney in your corner. If you have any questions about how to set up a living trust or concerns about other matters of estate planning, please contact Brian Chew, Attorney at Law at OC Wills & Trust Attorneys at 949.347.5256.