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The gift of a living trust
Whatever wealth you build in your lifetime, however large or small it may be, you will want to establish a legacy with it long after you’re gone. For most people, that means ensuring that your family benefits from your hard work and doesn’t get stuck in a legal process that diminishes the gift to your heirs. Protecting your assets in order to bless your family doesn’t happen by accident; you need a plan.
One of the simplest things you can do to protect your family is to establish a living revocable trust. The key benefit to using a living trust, rather than a will alone, is that upon your death your core assets (your home, brokerage account, and so on) will avoid probate – a costly and lengthy procedure of allowing the courts to sort through your assets. By avoiding probate, a living trust also allows your assets to remain private, rather than become subject to public record. (Except for real estate, which is always a matter of public record.)
Unlike a will, a living trust can also protect you and your family while you are alive. With a living trust, you name a trustee (usually yourself) who will be in charge of managing the trust’s assets. Therefore, you are in charge of your assets during your lifetime, just as you normally would be.
However, you can also name a successor trustee to manage the trust if you become unable to do so. In other words, should you become ill or incapacitated, an incapacity clause in the living trust will allow you to have someone to step in and handle your bills and other affairs. And because it is revocable, you can always change your mind on who your trustee or co-trustees are and how your wealth should be distributed.
Some experts try to dissuade people from living trusts, citing high costs – but it isn’t true. If you have a complicated estate plan, then by all means seek appropriate legal assistance. But you can obtain a template document for free online and tailor it to your specifications. Or, if you want help, you can use LegalZoom to set one up for as little as $250.
In order to leave property within a living trust, you must sign a new deed showing that you now own the house as a trustee through your trust. This is essential for your property to be distributed as you delegate. You must also sure your trust is legal by signing it with a legal notary. Although the extra paperwork of a living trust may cause some to reconsider a traditional will, consider this: In wills, as much as much as 5% of the value of properties are eaten up in legal fees, and the average probate drags on for months before your inheritors see a penny.
On a final note, if you have children who are minors or you want to put a number of conditions on the gifts you leave behind, you still need a will in addition to a living trust. A will allows you to name guardians for your children as well as putting restrictions on the property that passes to your beneficiaries. A will also serves as a backup device for any property that you did not transfer into the living trust.
As you gain momentum in growing your money machine, please seek out quality assistance when thinking about estate planning, but in the meantime, don’t wait to set up a living trust. Everyone needs one.