Estate planning involves making important decisions that will grow increasingly complex and difficult as your plan grows and expands. While your initial estate plan may be rather simplistic, it will likely grow more complex as your estate and your family grow. One of the decisions you may eventually need to make is whether to use a living trust as the primary method of distributing your estate assets. The Los Angeles trust attorneys at Schomer Law Group, APC discuss common reasons why you might want to use a living trust to distribute your estate.
How Does a Living Trust Work?
A trust is a fiduciary legal arrangement that allows a third party, referred to as a Trustee, to hold assets on behalf of a beneficiary or beneficiaries. All trusts can be broadly divided into two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s (trust creator) Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts.
Benefits to Using a Living Trust to Distribute Your Assets
Although a Last Will and Testament can distribute your entire estate, there are several important benefits to using a living trust as the primary distribution method, including:
- Probate avoidance. Probate avoidance is a secondary goal found in many estate plans because probate is costly, both in terms of the time and money spent on probating an estate. Assets held in a trust, however, bypass probate entirely. Consequently, assets held in a living trust can be distributed to your loved ones as soon after your death as you wish. This allows your intended beneficiaries access to much needed assets immediately instead of having to wait for the conclusion of the probate process which can take months, even years, to finish.
- Staggering an inheritance. Gifts made in your Will are distributed to the named beneficiary in one lump sum. Sometimes, that is not such a great idea. Young beneficiaries, spendthrift beneficiaries, or those who have struggled with addiction in the past should not be handed a large sum of money. The risk of the inheritance being squandered is simply too great. Using a living trust to pass down an inheritance, however, provides the ability to stagger the distribution of that inheritance, thereby limiting the risk.
- Privacy. If privacy matters to you, a living trust should be considered because the terms of a Will become a matter of public record when the Will is submitted for probate. If you prefer the terms of your estate plan to remain private, a trust is the better option as the terms of a trust are not made public.
- Control over how assets are used. Even though you will no longer be here, the idea of your heard-earned money being squandered or wasted likely doesn’t sit well with you. Unfortunately, however, once a gift is made in a Will it become the sole property of the beneficiary to do with as he/she pleases. A living trust though offers you the ability to use the trust terms to retain a certain degree of control over how the assets you gift can be used. You might include a provision that requires the assets to be used only for educational or medical expenses.
- Protecting the inheritance of a minor child. A minor child cannot inherit directly from your estate. If you are the parent of a minor child, using a trust allows you to choose a Trustee to protect your child’s inheritance until he/she is old enough to receive direct disbursements from the trust at which point you may still decide to stagger the inheritance you leave for your child, thereby doubling the benefits of using a living trust.
Contact Los Angeles Trust Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about using a living trust to distribute your estate, contact the experienced Los Angeles trust attorneys at Schomer Law Group APCby calling (310) 337-7696 to schedule an appointment.