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From movies and television shows, most people think of leaving their earthly possessions to others through a will and testament, but they are ignoring the living trust advantage. Often, it is a better option for the estate to establish a living trust instead of a will.
A living trust is established before your death (hence the name) as an alternative to a will. It is a way to distribute your assets to your surviving loved ones upon your death. All of an individual’s assets, including property, savings, investments, etc., are “placed” into the trust and distributed from the trust according to the provisions therein.
You are considered the grantor of the trust and those who receive the distribution of the assets are considered the beneficiaries. Trusts are known as “revocable living trusts” or “irrevocable living trusts”. The difference is that a revocable trust can be changed at any time. Assets can be “revoked” or removed from the trust and in fact the trust itself can even be completely eliminated from the estate plan. With an “irrevocable” trust, the assets cannot be removed, nor can the irrevocable trust be eliminated from the estate plan. Special provisions can be made in the case of a child requiring a special needs trust.
Many people understand the living trust advantage and choose it over the will for many reasons:
1. Avoiding Probate. Many people think if they create a will, their assets will not have to go through probate, which is the legal process of “proving” that the document is the acceptable last true testament of the deceased. Wills still require probate while trusts do not.
2. Immediacy of Distribution. The claims period for a will is a minimum of six months. A trust can distribute assets right away if stated in the provisions.
3. Privacy. A will is a public record but the provisions of a trust are private.
4. Taxation Advantages. These will vary widely with your specific situation, but the trust can be drafted so that whatever tax law is in place at the time of your death will be used to your advantage.
As in the preparation of any legal documentation, there are many decisions to be made in order to create a trust that operates in the best interest of your family and specific tax situation. The handy chart below shows the living trust advantage by comparing the major differences between a will and a trust. At Gardi, Haught, Fischer & Bhosale LTD, we are experienced at helping families establish legally sound estate planning solutions that provide peace of mind for every member of the family. If you are considering establishing a trust for your estate plan, please contact us for a consultation at 847.944.9400.
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