A trust is a useful estate planning tool that estate planners should be familiar with. A trust allows property to be managed by one person for the benefit of another person. The party managing the trust is referred to as the trustee. The party that the trust property is managed for the benefit of is referred to as the beneficiary. A living trust is a category of trusts that estate planners should also be familiar with.
What is a living trust?
A living trust is a trust created during the estate planner’s lifetime rather than upon their death. Trustees are required to administer the trust according to the terms of the trust and in compliance with all local laws. Trustees have fiduciary duties to beneficiaries and can be liable for a violation of their duties.
What are the benefits of a living trust?
There are several different potential benefits of a living trust estate planners should consider when estate planning including:
- Avoid probate – the probate process can be costly and time-consuming and a living trust can help to avoid that process. The probate process is a court-administered process that involves paying the debts of the estate and distributing property to beneficiaries upon the estate planner’s death.
- Reducing taxes – a living trust can help avoid tax penalties paid by the estate.
- Maintain financial property – the probate process is a court-administered public process whereas using a living trust is a private process.
Living trusts can also help with other aspects of the estate planning process and administering an estate including the use of assets if the estate planner becomes incapacitated and some point. Because of the variety of benefits of a living trust, estate planners should be familiar with what they are and consider one for their estate plan.