Living trusts are a very popular tool used by many people to help preserve their assets and avoid probate, and this is well known. But what exactly is a living trust, and how does help an individual avoid probate?
Trusts are basically arrangements between three people; the grantor who is establishing the trust, the beneficiary who is the individual who ultimately benefits from the trust’s creation and the trustee who is given the responsibility of handling the assets on behalf of the grantor for the beneficiary. There are some peculiar exceptions to this structure, however. For instance, a grantor can elect for him or herself to serve as the trustee. A trust that is created to function while the grantor is still alive is known as a living trust.
The probate process is triggered if an individual dies and did not designate a recipient for the process and did not meet other requirements that vary from state to state. Probate can take a long time to transfer property to its rightful owners, and can greatly diminish assets in the process. By creating a living trust or revocable living trust (which the grantor may dissolve at any time), the owner of property ensures that his or her property goes directly to the intended beneficiaries, instead of having to get picked apart by probate. Once the assets held within the trust have been appropriately distributed, the trust is dissolved.
This is an extremely simplified representation of a system that can be very complex, with many requirements and exceptions. An experienced estate planning attorney can help walk you through the various options in trusts, explaining the specifics of the law that may be relevant to your situation, guiding you to the perfect document for your needs.
Source: Findlaw.com, “Living Trust Information,” accessed Oct. 20, 2016