Many use a living trust in their estate planning strategy. However, whether it’s right for you depends on your personal necessities, goals, and situation.
What is a Living Trust?
Using whatever assets you choose to fund the trust, you create a living trust while you’re still living. Typically, the creator of the trust is the trustee and has the power to manage the assets fully. Just like many other financial tools, living trusts are subject to complex tax rules and regulations. Always consult with a professional before deciding to develop a trust for yourself.
Living trusts define a beneficiary or beneficiaries who will be the automatic recipient of those assets when you pass away. Similar to an IRA or will. There is also a revocable living trust. In a revocable living trust, the trustee maintains the power to change the terms of the trust at any time. This includes the ability to change the trustee, beneficiaries, or even to eliminate the trust altogether.
What Are the Advantages?
Here are some potential advantages to creating a living trust:
- Prevent Probate – In a living trust, the assets in the trust are intentionally set to transfer outside of probate. As a result, this allows a private transfer of the assets.
- Organize Your Estate – In the event of incapacity, but not death, this type of trust can be an invaluable tool for caring for you and your property. That is to say, it is in the hands of a dependable trustee and has the necessary assets.
- Straightforward – For experienced and qualified estate planning attorneys, creating a living trust specific to your goals should be a simple process. Besides, if there is a need for changes in the future, it’s a relatively easy task.
- Elude Will Challenges – A living trust could be less vulnerable to the challenges that can be brought on during a will transfer.
What Are the Disadvantages of a Living Trust?
A living trust is not an elixir for all estate issues – there are potential disadvantages:
- A living trust does not protect assets from creditors and is included as a “countable resource” in the determination of Medicaid eligibility.
- Revocable living trusts include a cost associated with their creation.
- Some assets may be challenging to transfer into the trust. As an example, transferring the ownership of a vehicle to the trust may create difficulty in setting up insurance for that vehicle due to you no longer being the owner.
- Living trusts are not designed as a tool to save on taxes in life or death.
Still have questions about your estate plan and whether a living trust is right for you? Check out episodes 8 and 9 of The Guided Retirement Show where Dean Barber and estate attorneys Garrett Griffin and Jason Salinardi go in-depth on estate planning topics just like this one.
You can also get an estate planning consultation with either Garrett or Jason by scheduling a complimentary consultation below or giving our office a call at 913-393-1000. They will discuss the next steps in your estate plan and what you can do to help achieve your goals.
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Investment advisory services offered through Modern Wealth Management, Inc., an SEC Registered Investment Adviser.
The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.