Who Should Consider a Living Trust?

It is known to the general public that there is a need for a living trust, but many hesitate to establish a living trust because most are unsure about the benefits of having a living trust and how much one should have accumulated in assets before considering owning assets under the living trust name.

Simply put, a living trust is the process of transferring assets under individual names in order to avoid court probate upon one’s death. This allows beneficiaries to easily access the assets in the case of death in the family. However, many mistakenly believe one of two things: (1) only individuals with significant accumulated wealth should consider establishing a living trust and (2) it may help to avoid estate tax issues, but for both, that is not the case.

Fast Fact: Ensure the privacy of your family with a living trust. If probated, information becomes a public record, unlike a living trust which is a private document.

Then, who should consider setting up a Living Trust?

  1. If you own real estate property, land or have other types of assets worth more than $100k, it is worth considering owning those assets under a living trust to avoid probate. A possible consequence of not holding your assets under a living trust is that beneficiaries may spend a significant sum on legal fees during the probate process. There is also no protection of privacy as all corresponding information is disclosed to the public during the process of going through probate.
  2. If you have minor age children, you should consider having a living trust. Having a living trust may remove a huge confusion about who the caregiver should be, and who the custodian should be for the children’s inherited assets. Appointing a guardian/custodian may evade unnecessary legal battle between family members.
  3. If you wish to inherit or gift your assets to non-family members or oppositely circumvent gifting a spouse or children – setting up a living trust may help to remove the uncertainty of who should receive an inheritance. It would help to prevent any unnecessary legal fights among children. For instance, in cases where a child doesn’t receive an inheritance based on parents decision, that pronouncement can be challenged if there is no living trust to prove its validity.
  4. If spouses have different views and preferences as to who should inherit their assets, then they can consider setting up an AB Trust so that assets can be gifted separately. Many attorneys recommend this trust planning strategy for second marriages or for families where spouses have different beneficiaries in mind. In states such as California, where assets between married couples are considered commonly owned, it may be critical to set up an AB Trust should you have various predilections to gifting your assets.
  5. If your health has or is presumed to deteriorate in the future, having a living trust to designate/ appoint someone to be the power of attorney for health and financial related matters will make sure your wishes are carried out with health and financial related matters. Having the living trust permits the appointed person to act in power when required, such as in the case of an individual being incapable of making health or financial decisions due to critical illnesses.

With the above mentioned, there are a number of benefits to having a living trust, and quite contrary to what many think, the process and costs are not burdensome in comparison to the available benefits.

Many individuals delay the process of establishing a living trust thinking that it is troublesome. However, to avoid the probate process, effortlessly transfer valuable assets to your loved ones, and to avoid unnecessary legal correspondences between beneficiaries, custodian/guardian to be, it may prove to be most valuable to have a living trust established. You should consult a legal professional to determine whether or not you should establish a living trust and what type of living trust you should consider in order that you may understand how it can be most suited for your specific situation.

Disclosure: Profectus Financial does not provide legal or tax advise. Please consultyour own legal or tax advisor for qualification of any investment or tax strategies. This is for educational purposes only. This is not a soliciation of a particular investment product or company.