A living trust refers to a type of trust created by a grantor who entrusts the management of his/her property to a trustee on behalf of his/her chosen beneficiary. It is called a “living trust” as it is created while the grantor is still alive, rather than upon his/her death. With this trust, the trustee can transfer the assets and properties of the grantor while avoiding the complicated and expensive process called probate.
Types of Living Trust
There are two types of living trusts: revocable and irrevocable.
With the revocable type, the grantor can assign himself/herself as the trustee to be able to manage and take control of the properties in the trust. He/she can also make amendments and changes in the stipulations of the trust. In other words, at any time he/she can name other beneficiaries or make the trust null and void.
With the irrevocable type, the grantor transfers certain rights in controlling the trust over to the trustee. Simply put, the trustee is named the legal owner of the properties, allowing the grantor to reduce taxable estates. However, once the living trust is finalized, there are only minor and limited changes that can be made within the trust. The names of the beneficiaries cannot be changed.
Benefits of a Living Trust
Like a last will, a living trust is also a type of estate planning that allows you to plan what to do with your properties in the event of your death. But there are certain benefits provided by a living trust that you should know about.
For one, with living trusts, you can avoid the process of probate. This refers to the process administered by the court with regards to paying debts and distributing assets to the beneficiaries. As what most experts will tell you, this is not only very time-consuming but can also be very expensive. Your heirs will have to wait for months before they receive their inheritance. Plus, the assets are reduced significantly after paying for lawyer fees and court costs.
Other benefits of a living trust include:
- Tax reduction
- Financial privacy
- Regulation of the use of assets in the event the grantor becomes disabled.
Since the living trust does not go through probate proceedings, it means that the documents submitted will be not become public record. So who gets a copy of the living trust?
Who Gets a Copy?
Of course, the first person will receive the copy of the living trust is the person to whom the grantor will entrust his/her properties. The trustee will then become responsible in overseeing and settling the trust. Before it is finalized, it is imperative for the trustee to review and understand the stipulations and instructions in the trust to avoid any issue or problems. He/she will also need to find out what the compensation is for carrying out this responsibility.
The beneficiaries who will be named in the trust can also get a copy of the trust in order for them to determine what properties and assets they will get, and how they will be able to get these. There are two types of beneficiaries: initial and secondary. The initial beneficiaries are entitled to the properties in the event of the grantor’s death while the secondary beneficiaries will only receive what is entitled to them after the death of the initial beneficiaries. For minors, the beneficiary’s guardian (natural or legal) will be the one to receive the copy on behalf of the minor beneficiary.
Other people who will receive a copy of the living trust
- Heirs at law
Similar to a last will, it can also be complicated to create a living trust without the help of a lawyer. Although there are many books that you can use to understand how it works, it is still best to consult an attorney to make sure everything goes smoothly and without a hitch.