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Why Creating a Living Trust Should be Part of Your Financial Planning
A trust is an arrangement in which one or more people manage or take care of property for someone else’s benefit. A living trust is a trust that is created during your lifetime.
Imagine working hard all of your life to secure assets that helped to provide financial stability for you and those you love most. Only, after you pass away, everything you work for gets taken from those you meant it for. Though no one likes to think about death, it’s a reality that needs to be considered and planned for – sooner rather than later. Skipping this part of the financial and/or estate planning process leaves your loved ones in a mess that can take years and a lot of money to get out of.
While you’re living, you have the power to create protections such as living trusts to secure your assets and the futures of those you’ve left behind. A living trust is essentially a legal document that is created while you’re living to protect your assets. It allows you to manage these assets until which time you should pass away and then the assets are distributed to the beneficiaries without the complicated, time-consuming, and expensive probate process.
Types of Living Trusts
There are several kinds of trusts available to protect you, your assets, and your loved ones. A revocable trust is one in which you are named the trustee and have the power to manage the assets as you see fit until the time you pass. At any time you want to change the assets, details in the trust, or trustee, you may do so. An irrevocable trust is similar to a revocable trust, expect the details within cannot be changed. An asset protection trust prevents creditors from being able to collect or make an attempt to collect past debts from the assets listed within the trust. Lastly, charitable trusts are legal documents designed to a provide proceeds from the trust holder’s assets to the charities of their choice. You can work with trust attorneys in San Diego or whichever city you live in to determine which trust is right for you and how to get started.
Reasons to Have a Living Trust
Now that you have a better understanding of what living trusts are, let’s take a closer look at why it would be to your advantage to add this to your financial and estate planning:
- Skip the Probate Process – When a person passes away, their assets, debts, and other final affairs are left to be divided up and resolved. If there is no legal documentation in the form of a will or living trust, the division and resolution of the estate is left for the legal system to work through. This means that any properties, bank accounts, businesses, stocks, or other assets you may have left for loved ones will be divided up based on the laws surrounding probate in your state. It leaves room for anyone from your children and siblings to bill collectors and other agencies to get their hands on what you’ve worked hard for. Depending on where you lived, how many involved parties there are, how many assets you have, and how much debt has been accumulated, it could take the probate court system months to get to your case and years to come to a resolution.
- Save Money – The probate court process is lengthy, to say the least. However, that is not the only issue your loved ones will have to be concerned with. From paying associated fees to obtaining an attorney to fight for what is rightfully theirs your loved ones could end up spending hundreds if not thousands of dollars trying to obtain your estate (or the portion they believe to be theirs). When you have a living trust in place, however, you eliminate the probate process thus saving your loved ones a large amount of money.
- Peace of Mind – Who in their right mind wants to put a lot of undue pressure and stress on the ones they love? When you haven’t taken the necessary steps to safeguard your assets and their financial future, however, that’s exactly what you’re doing. Creating a living trust now lets you know that no matter what happens to you, those you leave behind won’t have to suffer unnecessarily.
It might be easier to allow “someone else” to handle your affairs after you’ve passed on, but the truth is, that “someone else” is likely going to be the legal system. When the courts get involved in your final affairs, it can leave a lot of stress and turmoil for those you love most. That’s why, as you’re doing your financial planning, it is strongly advised that you do your due diligence and develop legal documents like trusts that keep all you’ve worked for and all you love safe.