A living trust is basically a trust that is created when one is alive rather than being created when one dies. This legal agreement is drawn to ensure the property of an individual is dispersed as per his wishes when he dies. The individual transfers the ownership of assets to the trust. He then chooses a trustee who administers it. The trustee could be a friend, family member, a law firm or an attorney among others. The trustee holds the legal title of the property on behalf of the beneficiary.
Since this agreement is entered into when the owner is still alive, it can begin benefiting him immediately. It is revocable meaning that one can make any desired changes. It shows how the income and assets it has earned should be distributed after his death. If the owner is the trustee and he becomes disabled or incapacitated a successor trustee can manage the financial affairs.
It can be used for all kinds of properties. Just like the will, it offers quite a broad planning flexibility. For it to work properly it is important to ensure that all the property has been transferred from the name of the owner to that of the trust.
There are many benefits of having such an agreement. Firstly no property registered herewith will be subject to probate. Probate is a process supervised by the court that involves distributing your property to your inheritors and paying off your debts. With this kind of agreement, your assets technically are not yours any longer as the trust owns them. So, your loved ones are saved the hassle of probate which can be expensive and time consuming.
If one is able and willing, he is allowed to manage his own trust. In this case, he makes a provision for the successor trustee to take over after his death. Upon your death, the successor trustee simply transfers all ownership to beneficiaries named in the trust. After all the property has been transferred to the named beneficiaries, the trust ceases to exist.
Another benefit is that this document offers some level of privacy. This is because the terms of this agreement are not made public upon the death of the owner. This means that the deceased individual's debts, assets and inventories remain private. The estate is then distributed privately.
This is an easy way of transferring assets to your inheritors free of probate in a matter of weeks or a few months of your death. It is especially ideal for people with large estates. A married couple would also find it ideal at it could offer savings on income and on estate taxes in form of a joint living trust.