What Is A Living Trust?
What Is A Living Trust?
By Cameron Huddleston
Chances are, you know what a will is. This legal document spells out who gets your assets when you die. It also allows you to name an executor to oversee the distribution of your assets and guardians for your children.
If you don’t have a will, your state’s laws will dictate who gets what. That means your home, car, investments or any money in your bank account could go to someone you don’t want to get it. Even your children could end up with someone you wouldn’t have chosen.
Some people go a step beyond a will by creating a living trust. You’re probably thinking those people are the rich and famous. However, trusts aren’t just for the super wealthy. There are benefits of a living trust that make this estate planning tool ideal even for the not-so rich and famous.
Living Trust Basics
Like a will, a living trust allows you to specify who gets your assets when you die. However, a trust can give you a lot more say over when heirs get the assets you’re leaving behind and how they get those assets, said Geoff Madsen, CEO of Independent Trust Company, which provides trust management services.
The primary difference, though, between a trust and a will is that you must transfer your assets to a trust before you die. That can involve changing the title on property deeds from your name to the trust and filling out forms with your financial institutions.
You also have to name a trustee to manage the assets in the trust. “It’s like forming a business entity,” Madsen said. You can name yourself to be trustee while you’re alive then name a successor trustee to manage the trust once you die.
The trustee has a lot of responsibilities – including distributing assets to beneficiaries, filing an annual tax return for the trust, ensuring the trust complies with state laws and much more.
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