A living trust, also known as an inter vivos trust, is a legal arrangement that allows you to transfer ownership of your assets to a trustee, who manages them for your benefit while you are alive and distributes them to your beneficiaries after your death.
Living trusts can be used for a variety of purposes, such as:
- Reducing estate taxes: Living trusts can help to reduce estate taxes by transferring ownership of your assets to the trustee before your death. This removes the assets from your estate and makes them subject to different tax rules.
- Protecting your assets from creditors: Living trusts can help to protect your assets from creditors and lawsuits. If you are sued or become bankrupt, the assets in your living trust may be protected from seizure.
- Providing for the care of minor children or dependents with disabilities: Living trusts can be used to provide for the care of minor children or dependents with disabilities after your death. The trustee can manage the assets in the trust and use them to provide for the needs of the beneficiaries.
- Managing your assets if you become incapacitated: If you become incapacitated, the trustee can manage your assets in the trust for your benefit. This can help to ensure that your assets are properly managed and that your needs are met.
How to Create a Living Trust
To create a living trust, you will need to sign a trust agreement. The trust agreement is a legal document that sets out the terms of the trust, such as the assets that are to be held in trust, the beneficiaries of the trust, and the powers and duties of the trustee.
You will also need to transfer ownership of your assets to the trustee. This can be done by changing the title of the assets to the name of the trust.
Choosing a Trustee
The trustee is responsible for managing the assets in the trust and distributing them to the beneficiaries according to the terms of the trust agreement. It is important to choose a trustee who is trustworthy and who has the skills and knowledge necessary to manage your assets.
You may want to choose a family member, friend, or lawyer as your trustee. You may also want to consider choosing a corporate trustee, such as a bank or trust company.
Updating Your Living Trust
You can update your living trust at any time by signing a new trust agreement. You may want to update your living trust if you have any major life changes, such as getting married, divorced, or having children.
A living trust can be a valuable estate planning tool. It can help you to reduce estate taxes, protect your assets from creditors, and provide for the care of your loved ones after your death. If you are considering creating a living trust, you should consult with an experienced estate planning lawyer to discuss your options.
This article is for informational purposes only and is not legal advice. Contact us today to discuss your specific situation.