A living trust is a legal document designed and written by you while you’re alive. Similar to a will, a living trust will dictate your desires regarding your assets, dependents, and any heirs. The most significant difference between a will and a living trust is that a will only activates after you’ve died and has entered probate. A living trust, on the other hand, bypasses the costly process of probate, enabling your success to carry out all instructions immediately.
Types of Living Trusts
There are currently two primary types of living trusts to consider, including:
- Revocable living trust – With a revocable trust, you will transfer all assets over to your trust. You will retain total control of all assets as the trustee of the living trust, however. You may then choose to change or revoke the trust at any time. The assets will pass directly to your listed beneficiaries without entering probate.
- Irrevocable living trust – An irrevocable living trust, on the other hand, allows you to give away all assets permanently. Once your assets are gone, you relinquish all control and interest over them. These assets, now that they are no longer a part of your estate are not subject to estate taxes. An irrevocable trust is only appropriate in rare circumstances.
Living Trust Benefits
While the most significant benefit of a living trust is its ability to avoid probate, there are others. For instance, a living trust may save you money in the long-term. At first, drafting a trust may cost more than a will, which is normal. It’s an investment. Afterward, however, court costs, probate, and the transfer of assets will also save you and your family money.