When you created your initial estate plan, you probably relied on a Last Will and Testament to take care of distributing your estate assets. As you and your estate grow, however, so should your estate plan. It may be time to consider another option for distributing your estate assets – a living trust. To help you decide which option is right for you, the estate planning attorneys at Nash, Bean, Ford & Brown, LLP explain some common reasons why many people choose to use a living trust to distribute the bulk of their estate.
Last Will and Testament Basics
By far the most well-known of all estate planning tools, a Last Will and Testament is a legal document that communicates a person’s final wishes pertaining to possessions and dependents. Your Will allows you to make both specific and general gifts. For example, you might make specific gifts of your art collection along with stock in Apple to a designated beneficiary. You could also gift a percentage of your estate to your son. For example, you could gift half of your entire estate to your daughter. Your Will is also where you will appoint someone to be the Executor of your estate. Your Executor plays a vital role in the probate of your estate after your death. Finally, a Will provides you with the only official opportunity you will have to nominate a Guardian for your minor children in the event one is ever needed after you are gone.
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor (also referred to as a Maker or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. All trusts are first divided into one of two categories – testamentary or inter vivos – the latter of which is more commonly referred to as a living trust. A testamentary trust is a trust that arises upon the death of the Settlor and which is typically activated by a provision in the Settlor’s Will. A living trust is a trust that takes effect as soon as all the legalities of creation are in place. A trust agreement is also a legal document that serves to establish a trust. Assets held in the trust are distributed by the Trustee according to the terms of the trust. When used to distribute estate assets after the death of a Settlor, the trust terms will tell the Trustee when to distribute assets and which assets to distribute to which beneficiaries.
Why Should I Consider Using a Living Trust?
The only way to be certain that a living trust is the right option for you is to consult with your estate planning attorney; however, it helps to know some of the reasons other people choose to rely on a living trust:
- Avoiding probate – a Will must go through the probate process, meaning it often takes months, even years, before the assets gifted in the Will are actually distributed to the intended beneficiaries. In addition, probating a Will can be expensive, thereby diminishing the value of the estate that is ultimately distributed to loved ones. Assets distributed through a trust, however, are considered non-probate assets, meaning they can be distributed right away without the need to go through probate.
- Protecting the inheritance of a minor child – if you are the parent of a minor child, you likely want the estate you leave behind to provide for your child after you are gone. Your minor child, however, cannot inherit directly from your estate. As such, assets gifted to a minor child in your Will must be managed by someone else until the child reaches the age of majority. If you make those gifts using a trust, however, you get to decide who will manage the assets through your choice of Trustee.
- Control – once a gift is made using a Will you have no control over how the gift is used by the beneficiary. With a trust, however, you have the option to use the trust terms to retain a certain amount of control over the assets you gift. For example, your trust terms could require the assets to be used for educational purpose only or could limit distributions based on the beneficiary meeting certain conditions first.
- Private – you may not be thrilled about the idea of the details of your estate plan being made public. The provisions of your Will, however, will become public as soon as the Will is submitted to probate. A trust agreement, however, does not become public unless the trust is involved in litigation.
Contact Estate Planning Attorneys
For additional information, please download our FREE estate planning worksheet. If you have additional questions about using a living trust to distribute your estate, contact the experienced estate planning attorneys at Nash, Bean, Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.