A living trust may be the right choice for some consumers but it is not the right choice for all consumers. This article looks at some of the more common issues associated with living trusts.
First of all, it should be understood that a living trust is not the same as living will. They are two different things and should not be confused, one with the other. A living trust is a legal document that ensures that a person’s property is dispersed according to his or her wishes upon death. It can also be used to include issues concerning minor children and who the deceased wishes to have as guardian for those children.
A living will, on the other hand, is a legal instrument that carefully details the types of medical treatment a person wishes to receive, or not receive, should that person become incapacitated through illness or injury.
When you work with a living trust, you actually transfer ownership of your assets to the trust. You then appoint someone to act as the trustee and that person will administer the trust. The trustee may be a family member, attorney, friend, or even a business establishment such as a law firm.
By having a living trust, you can save your family and others some problems that might pop up later on after your death. The main issue that it can deal with is probate. A living trust does not have to go through probate court because your assets are technically no longer yours; they are owned by the trust. Only those items that are still in your name will be subject to probate. In order to keep your family from having to go through probate, however, you must make sure that all property has actually been transferred out of your name and into the trust. If you fail to do this, the living trust is void and the state controls the distribution of your property. If minor children are involved, the state will decide who raises them.
If you are considering the use of a living trust, be very careful with whom you work with. There are companies out there who will happily take your money in exchange for what they call “do it yourself” kits that are all but worthless later on when they are needed. The best way to make a living trust is to do it through a reputable attorney. In fact, some states will not allow validity of any living trust that is not handled through a law professional.
You should also be aware of the fact that a poorly written living trust can actually cost your loved ones more money than they might want or be able to spend. It is very important that you take the time to have your living trust set up properly and that you transfer your assets into the trust as required. No one likes to think about their own demise, but no one wants to saddle those left behind with undue burdens either. This can be especially important if you have minor children who will need a guardian in case you are not around to take care of them.