There are so many misconceptions around trusts, especially the thinking that trusts are only for wealthy people, according to the recent article, “2 Key Benefits of Living Trusts” from Forbes. Having a fully funded living trust (also called a revocable trust or revocable living trust) provides benefits compared to assets not held in trust at your passing.

What happens to assets not in a trust after death?

  • If you own assets as an individual, they will go through probate. While bank and investment accounts do permit transfer-on-death (TOD) and payable-on-death (POD) elections to bypass probate, this is not appropriate for every situation.
  • If you own assets with beneficiary designations, these will be passed directly to the beneficiaries outside of probate. These are typically retirement accounts, life insurance, some investment accounts, pensions and annuities.
  • If you have joint ownership of assets, they will become the property of the surviving joint owner(s) after death. The most common jointly owned assets are real estate, bank and investment accounts.

 

It may sound great to have property pass directly to your beneficiaries, but what happens if your beneficiaries aren’t in a good place to receive your property at that time? Lets look at the benefits of having a living trust.

Two of the most common benefits of having a living trust are avoiding probate and having greater control over the distribution of assets.

Avoiding Probate

Probate incurs expenses and can take a year or more to settle an estate. Any assets going through probate become part of the public record, which can create a host of other issues.

When assets go through probate, the court has the final word on how assets are distributed. This may align with your wishes, but it might not.

If one spouse passes and all funds (and/or a privately owned business) are in their own name, the surviving spouse may be left without funds to pay bills until the spouse’s estate is settled at the completion of the probate proceeding. Having a living trust means the survivor, if named as a beneficiary of the trust, has access to assets in the living trust.

Greater Control

With a living trust, you control the distribution of the assets (i.e., your stuff goes to the people you want it to) without your personal financial information becoming part of the public record.

Not only can you control distribution based upon your current wishes, but your successor trustee can protect your money and your beneficiaries by making the best decision with the information available at the time of your passing. If your beneficiary is a minor, going through a divorce, has creditor issues, is disabled, or has a drug or alcohol problem, your trustee may be able to delay distribution to avoid wasting your money or hurting your beneficiary. While your beneficiary may not have these issues now, we don’t know what issues will arise in the future. A living trust provides the flexibility necessary to protect your assets and your beneficiaries.

Get Help from an Experienced Attorney

Your estate planning attorney can create a living trust, naming you as the trustee and a person you chose to serve as a successor trustee. Your successor trustee will be responsible for distributing the assets in the trust upon your death according to your wishes.

Trust laws are state-specific, so speak with an experienced estate planning attorney to create a trust that suits your unique situation. Feel free to book a call with us now to get started if you live in Missouri or Illinois.

Reference: Forbes (Jan. 24, 2024) “2 Key Benefits of Living Trusts”