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Providing Legal Services and Guidance for Clients Wishing to Add a Trust to Their Estate Plans
Among the many tools and techniques available to those interested in planning for the financial future of their families, living trusts have become increasingly popular due to their many advantages, such as allowing more control over asset distribution after death and enabling beneficiaries to receive their inheritance sooner by avoiding probate. However, it may be hard to understand how living trusts work and which type of trust works best for your particular estate planning goals.
The attorneys at Bratton Law Group explain the facts about living trusts in Philadelphia and go over the reasons why working with a living trust attorney may be crucial to help you make the right choices for your estate plans. If you would like legal advice to build your estate plans or select the right living trust, contact the Bratton Law Group at 267-323-4038.
What Is a Living Trust?
A living trust is an important estate planning tool that allows you to place certain assets into it and control how and when these assets are distributed after you pass away. In a sense, it works as a “container” for your assets. You can fund your trust with a variety of assets – money, investments, stocks, bonds, real estate properties, vehicles, and any other assets you wish to transfer to your loved ones after you pass away.
A living trust is named that way because it is created and funded during your lifetime. As the person who created and funded the trust, you would be called the trustor or grantor. You would also need to name a person to manage the trust, called a trustee. The trustee can be the same person as the trustor or someone else. You should also name a successor trustee to take the place of the original trustee in case that person is unable or unwilling to fulfill their role. The people who are named as recipients of the trust assets are called beneficiaries. There are a few different types of trusts designed for a variety of goals. Some common examples include special needs trusts (SNT), charitable trusts, asset protection trusts, spendthrift trusts, and life insurance trusts.
What Is the Difference Between a Revocable Trust and an Irrevocable Trust?
Besides the different types of trusts, each type of trust can be made revocable or irrevocable. A revocable trust is a type of trust that can be changed or canceled at any time during the life of the trustor. For example, if you created a revocable living trust a few years ago but now have undergone significant life changes, you may decide that the trust no longer aligns with your estate planning goals. Because the trust is revocable, you are able to cancel it fairly easily. You can also add or remove assets and beneficiaries at any time.
In contrast, an irrevocable trust cannot be easily canceled or changed once it is created. The assets used to fund an irrevocable trust will technically no longer be owned by the trustor and become the property of the irrevocable trust. The only way an irrevocable trust can be canceled or changed is by obtaining the authorization of the trust’s beneficiaries. An attorney can advise you on whether a revocable trust or an irrevocable trust would be best for you.
What Are the Advantages and Disadvantages of Having a Living Trust?
There are many advantages to having a living trust. Living trusts are popular choices for those who wish to avoid probate. Typically, assets named in a last will and testament must undergo a legal process called probate, in which a judge oversees the process of administering the decedent’s estate and distributing assets to beneficiaries. This process can be notoriously lengthy and costly, depending on the size and complexity of the estate. Assets in a trust do not need to be probated and can be distributed directly to beneficiaries in accordance with trust terms.
In addition to probate avoidance, a trust may allow you greater flexibility in determining how your assets will be distributed. For example, suppose you have a young nephew to whom you would like to leave some money, but you worry about his spending habits and believe if he received it all in a lump sum, he would end up wasting the funds frivolously. So, instead, you add him as a beneficiary of your trust and add details to the trust documents explaining that your nephew should receive part of the money after he turns 21 and the rest when he gets married or purchases a home. In contrast, if you left him the money through your will, he would receive it all at once, as there is no way to delay the distribution of probate assets.
There may also be a few disadvantages associated with a living trust. First, there is a significantly higher upfront cost and work required to create and fund the trust. You should also take into account the costs that may be needed to manage the trust, especially if you are using a professional trustee such as a financial advisor or an attorney. It is always best to consult an attorney to learn if a trust is right for you.
Do You Need an Attorney to Help You Create a Living Trust?
Hiring an attorney for the process of creating your living trust is highly recommended, as your attorney can help you select the right type of trust for your needs and guide you through the process of funding it and ensuring it will work for you as intended. The attorneys at the Bratton Law Group are here to help you with all your trusts and estate planning matters. Contact us at 267-323-4038 to learn more.