Although death is a difficult subject to discuss, it’s also a part of your financial planning obligations. You must prepare for the inevitable. Part of planning for the future means having a proper estate plan in place. Doing so minimizes financial difficulties for your family in your absence.
78% of young adults 18-36 and 64% of Generation X—aged 37 to 52—do not have wills. Be it lack of financial affluence or miseducation; both peer groups don’t appear to bother.
When it comes to getting your affairs in order, you need a plan for the future. Find out here what a living trust is, how it works, and why you need one.
If you’re considering establishing a living trust, consulting with an experienced attorney is highly recommended. At New York Legacy Lawyers, our team of experienced Brooklyn trust planning lawyers can provide valuable guidance throughout the process, ensuring that your trust is properly structured. Contact us today at (718) 713-8080 to discuss how we can help you establish a solid living trust that reflects your wishes and protects your estate.
What is a Living Trust and How it Works
A living trust is a legal document created prior to death. This trust acts as an arrangement between you and a trustee.
In your passing, the trustee maintains possession of your property and assets. These assets flow into the trust. The trust goes into effect while you’re alive and maintains its effectiveness in your death.
You may add a provision to stop the trust on a specific date. Until specified, the trustee continues to manage the trust on behalf of you and your named beneficiaries.
There are several types of trusts. Discussed most often are the revocable and irrevocable trusts.
Revocable Living Trusts are the most flexible of the two. With this option, you’re allowed to move assets in and out of the trust as you please. You also have the recourse to revoke the trust at any time.
The Irrevocable Living Trust operates on more permanent motives. Once assets get placed in the trust, you cannot move or take them out again.
Each state has specific rules and regulations on trusts. So be sure to educate yourself on the guidelines before you set one up.
| Types of Living Trust | Details |
|---|---|
| Revocable Living Trust | Assets can be freely moved in and out of the trust. Can be revoked at any time. Offers control, privacy, and helps in avoiding probate. Allows for flexibility in managing assets during your lifetime. |
| Irrevocable Living Trust | Assets cannot be moved or revoked once placed in the trust. Offers enhanced asset protection, tax implications, and helps in avoiding probate. Provides a more permanent and secure structure for asset management. |
Allowable Assets
There are allowable and disallowable assets appropriate for transfer into a trust. And depending on the asset, the state may require you to get a new deed or title issued to the trust’s name.
Some permissible assets include:
- Bank Accounts
- Real Estate
- Jewelry
- Cars & Boats
- Securities
- Stocks and Bonds
- Artwork
- Heirlooms
For accounts like 401K and retirement, it’s impermissible for the trust to own them. But you can, however, list the trust as beneficiary. The same goes for life insurance policies and IRAs.
Who Owns The Property in Trust?
Within the structure of a trust, the trustee is tasked with being the legal custodian of the trust’s assets. Despite many people perceiving a trust as an autonomous unit, traditionally, it’s understood to be an extension of the trustee. As a result, assets are usually registered in the trustee’s name rather than the trust’s. This can lead to complexities when the trustee changes, as banks and taxation authorities often necessitate re-issuing titles for accounts and properties. While there may be reasons to contest the need for such re-titling, as the property is technically owned by the trust, it’s typically less complicated to abide by these requirements.
As a trustee, the individual’s job is to manage the trust’s assets for the beneficiaries’ sake. Unless the trustee is also a beneficiary, they’re not entitled to personally gain from the assets. Beneficiaries, conversely, play a more receptive role, obtaining advantages from the trust in the form of periodic distributions. Ownership of the trust assets will pass over to the beneficiaries once they are bequeathed to the beneficiaries in the form of gifts or as a matter of the distribution.
To ensure that trustees perform their fiduciary duty in administering the trust responsibly, trustees receive trustees’ commissions as compensation for their service. Nevertheless, beneficiaries are allowed to actively ensure the trust is being managed appropriately, with the option of taking legal action against a neglectful trustee. Moreover, if permitted by the trust document, beneficiaries can exercise specific powers over distributions and have the authority to appoint successor trustees.
What Does a Living Trust Do?
A living trust is a crucial estate planning tool that allows you to manage your assets during your lifetime and ensure a smooth transition of your estate after you pass. The trust is a legally binding arrangement between you (the grantor) and a trustee, who takes responsibility for managing your assets held in trust.
This arrangement doesn’t end with your death. Instead, the trust assets, which can include bank accounts, real estate, jewelry, cars, and securities among other things, are seamlessly transferred to your named beneficiaries under the trustee’s management. It’s important to understand that not all assets, like 401K and retirement accounts, are permissible for transfer into a trust.
Living trusts can be categorized mainly as revocable and irrevocable. A revocable trust offers flexibility, allowing you to move assets in and out of the trust freely and even dissolve it if you wish. Conversely, an irrevocable trust is more rigid. Once assets are placed into this trust, they cannot be removed or altered without the consent of the named beneficiaries.
A living trust allows you to maintain control over your assets during your lifetime and ensure a well-organized transition of your estate, reducing potential conflicts among beneficiaries and circumventing the often lengthy and costly probate process.
Why You Should Consider A Trust
There’s no rule of thumb about who should and shouldn’t have a living trust. You should always take stock and inventory of what you have.
And if you have dependents, decide if you’d like to leave them in a better financial situation.
You can work with an estate planning attorney to help you figure out the best way to manage your assets in life, and death.
Set up an Estate Plan
Don’t leave your future up to fate. Be proactive about your financial plans and set up a living trust.
Arrange your affairs the right way so that you and your loved ones benefit in the end.
Request a consult today for more insight into estate planning and asset protection. Contact us at (718)713-8080 to schedule a consultation.
https://yanafeldmanlaw.com/matters-of-trust-what-is-a-living-trust-and-do-you-need-one/
from New York Legacy Lawyers by Yana Feldman and Associates https://yanafeldmanlaw.com/matters-of-trust-what-is-a-living-trust-and-do-you-need-one/
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