Does a Living Trust really live up to its promises?
Like so many other things in life, a revocable living trust comes with both pros and cons. In reality, whether a revocable living trust will be a smart choice for the ownership of your property depends on your goals and circumstances.
Could a living trust be right for you? Let’s discuss briefly what a living trust entails.
A living trust (revocable trust) is a written legal document through which your assets are placed into a trust for your benefit during your lifetime and then transferred to designated beneficiaries at your death by your chosen representative, called a “successor trustee.”
While a Living trust can serve as a means of avoiding the hassles and expense of probate and help to keep your affairs private, it isn’t usually befitting for the goals of every family.
Things you should know and consider doing before creating a living trust
- Create a list of all your assets and make sure you have the paperwork for all of them
- Be diligent in transferring title to all assets to the trust, including those currently owned in your name as well as those obtained in the future
- Understand a trust is usually easy to change. Trust terms can be changed or revoked—until the trustmaker dies, when they become irrevocable.
- Be smart about the choice of your successor trustee or co-trustee – Inthe case of your incapacitation, your successor trustee would also be the one to handle your affairs.
- Consult with an experienced estate agent or estate planning attorney for overall expert guidance
The major Pros of having a living trust
- Flexibility: For a living trust, you will able to add properties to the trust when you wish, amend it however you wish, or immediately revoke it if you so desire.
- Privacy: The use of a revocable trust hides the nature and beneficiaries of your estate and avoids the publicity that may result from the scrutiny of the probate file
- Future Incapacity Protection: In the case where you are illness or incapacitation, a reliable successor trustee by as named in the trust contract by you can manage your home and other properties transferred to the trust
- Probate Avoidance: This is probably the greatest advantage of a revocable living trust. A revocable living trust will give your loved ones almost immediate access to cash during a difficult time.
- Legal costs and paperwork: A living trust requires that you remain diligent in keeping up with the transfer of new assets and removal of the asset you no longer own in order to maximize the benefits of the trust. This procedure usually adds to legal costs.
- No tax benefits: Many people believe that the formation of a living trust will save them on their tax responsibilities because of its status as an organization, but this is usually not true. There are ways to reduce the estate taxes within a revocable living trust, but they cannot be avoided.
- No protection against creditors: It is usually not advisable to count on a revocable living trust to automatically protect your home from creditors. However, there are other ways of protecting your house from creditors—discuss details with a financial professional.
- A Will may be required: In a case where certain assets exist outside of the trust at the time of the Settlor’s death, those assets are subject to probate and should be disposed of by the Settlor’s will. The kind of Will used in conjunction with a living trust is a “pour-over” Will. With this technique, all assets that pass through the will at your death is transferred to (poured into) your trust.
While a living trust makes sense for some people, Wills are just fine for others. A general rule among tax planners is that the larger the value of the estate, the greater need there is for a living trust—but this doesn’t guarantee total success, it is usually advisable you discuss with your estate attorney for expert guidance and best outcome
Here at Parc Bay Real Estate, we have a wealth of knowledge when it comes to the San Francisco estate planning and investing. We have successfully worked with numerous clients in evaluating their circumstances and creating a trust contract and/or will that best fits their goals. We are more than happy to help you and your family maximize wealth through diligent real estate planning and investing – the major purpose for our establishment. Do not hesitate to contact us today if you have any questions or concerns regarding trusts, investment property or any other areas of real estate. We look forward to hearing from you.
Visit our core service page to learn about us, what we do and how we can help you maximize the benefits of transferring your investment properties to a reliable trust. Let’s work with you to earn what you really deserve.