While many financial instruments safeguard your interests, living trusts are gaining popularity nowadays. Many confuse a living trust with a will; although in principle, they might be the same in nature but very different in execution. A living trust is an agreement between you and the other party for the safekeeping of your state and its financial matters. A living trust can help you with many things both in life and after death. Following are a couple of things you should know before you set off for a living trust; you may get connected to any known law firm that professionally helps with living trusts.
1. Revocable and Irrevocable Trusts
There are two types of living trusts; before you nominate someone, it’s necessary to understand them and know why each trust is essential.
- Revocable Trust: The trustee’s name can be changed at any time as long as you are of sound mind. Most living trusts are revocable as they offer more control to the owner. You can change the trustee and all other parties in the trust if you think the trust is not beneficial enough.
- Irrevocable Trust: As the name suggests, the trustee in this type cannot be changed once appointed. These are not as acceptable as the revocable ones but are made by people with a terminal disease or significant disabilities.
Both types offer the same benefits; however, the trustee should be named after extensive brainstorming in an irrevocable trust. You and your spouse are usually nominated as trustees for greater control and security in revocable trusts.
The people nominated for running and managing your living trust are called trustees, and can be more than two people. As discussed previously, usually, people appoint themselves as a trustee. However, they must nominate a successor in the same document in case of untimely death or other untoward incidents that makes them invalid. If you are the trustee, there are diminished responsibilities for managing your estate’s affairs. It will not show as your asset; therefore, you don’t have to worry about taxation. If you are earning from the asset, you have to show it as your income and not pay property and other taxes. This is also why many people prefer a living trust over a will. In case of your death or other disabilities, your partner in the trust will take over the proceedings. However, they should be nominated by you initially before taking charge.
Although anyone can make a living trust, specific scenarios will prove more beneficial than others. Following are some instances when you should go for a living trust;
- If you have a property in another state or country.
- If you think your illness will affect your ability to make decisions or you are suffering from a terminal disease.
- If the beneficiaries of your will or state are disabled or incapable of making decisions.
- If you want to streamline your estate affairs.
Living trusts are a great mode to manage your assets and estate without losing control over decision making. Contact a suitable attorney specializing in these matters to get the best advice.