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What Is a Living Trust and How Do You Get the Best Policy?

Monday, February 8, 2021

Are you planning your estate? Are you wondering if you need a living trust?

Believe it or not, less than half of American adults currently have estate planning documents in place. While few of us like to think about death, it can give you great assurance about the future of your estate and your family in the event that the unthinkable occurs.

What is a living trust and how can you get the right policy for you?

Let's take a look.

What Is a Living Trust?

Like a will, a living trust spells out how you'd like your assets to get allocated after your death. These could include your real estate, investments, and bank accounts. It can get changed at any point during your lifetime.

Unlike a will, a living trust enables you to appoint a "successor trustee" who would represent your interests if you were to pass on. This person would direct your assets to the proper beneficiaries and see that your wishes get carried out.

One of the main advantages of a living trust is that your estate won't have to go through probate should you pass on. Probate is the legal process by which your will gets proven in court to be valid. A living trust means your beneficiaries would be able to receive your assets sooner and avoid the expense of probate.

Another huge benefit of a living trust is that, unlike a will, it can't be viewed by the public. A living trust is private and cannot get challenged.

What Are the Types of Trust Policies?

The most common type of trust policy is a living trust. It allows the person who owns the trust (the trustor) to benefit from their assets while they're allowed. Their assets will get passed on to their beneficiaries once they pass.

A revocable trust is able to be changed or terminated while the trustor is still alive. Assets can get transferred to a successor trustee upon the trustor's death.

A testamentary trust details how assets will get distributed once a trustor has died. These types of trusts are often instituted by the executor, who will manage the trust for the trustor's beneficiaries after a will has been created. A testamentary trust cannot get changed or altered.

With an irrevocable trust, the trust itself cannot be changed or altered by the trustor during their lifetime or revoked after they die. These are more tax-efficient because the trustor cannot take back their assets while they're alive.

Credit shelter trusts allow the trustor to give their assets to a spouse or family member tax-free. It means that your estate will remain tax-free even if it grows.

An insurance trust allows the trustor to combine their life insurance policy with a living trust. This is irrevocable, but the life insurance policy can get used for paying post-death expenses on the estate. 

With a qualified terminable interest property trust, you'll be allowed to present your assets to different beneficiaries at different times. You can direct your assets to get allocated to your spouse first, and to your children in the event of your spouse's death.

A charitable trust allows you to choose a charitable organization to be your beneficiary This could also be part of a normal trust in which some assets go to your relatives, and the rest gets given to a charity.

How Do I Choose the Right Living Trust Policy?

There are a number of considerations that will go into choosing the right living trust policy for you. If, for example, you're interested in sheltering the money in your account from taxes, you may want to look at a credit shelter trust or an irrevocable trust. An irrevocable trust could also be a good option for you if you don't plan on changing your trust during your lifetime.

Often, those with minor beneficiaries will opt for an insurance trust. If you have a mental disability, you may wish to choose a revocable living trust with provisions for determining your mental capacity. Single people should also choose a trust that is revocable in order to help their beneficiaries avoid probate.

Choosing the right living trust policy is complicated and involves a detailed understanding of your finances and beneficiary situation. The best thing you can do is find a qualified estate planning attorney who can review what you have and guide you through the best options for you.

How Can I Choose the Right Estate Planning Attorney?

Before hiring an estate planning attorney, you'll want to do a little research. Go online and search for qualified lawyers in your area. 

You can read online reviews and get an idea of what former clients are saying. Was the attorney knowledgeable and professional? Were they pleased with the way their estate was handled?

Many lawyers also offer free initial consultations that will give you an idea of whether or not you want to work with them. Do they seem to have a good grasp on your situation? Are you comfortable with their recommendations?

Make sure you're happy working with your attorney, as you'll probably be consulting them for some time after you have planned your trust. This is especially true if you have a revocable trust that you're allowed to make changes to.

Prepare a Living Trust

What is a living trust? In short, it's a safe way to protect your assets from probate and public scrutiny. With a little research and the right attorney, you can find the right policy for you.

Don't stop getting smart about your future now. For information on quality insurance, contact us today.

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