Welcome to the James H. Wilson Law Firm’s comprehensive FAQ on Living Trusts—an effective tool designed to ease the complexity of estate planning and avoid the procedural challenges of probate.
At its core, a living trust is a legal framework whereby a trustee holds property rights for a beneficiary. As the grantor, you can act as your own trustee, maintaining control over your trust’s assets. Distinguished from a testamentary trust, which is created upon one’s death, a living trust is established during the grantor’s lifetime, hence “inter vivos” or “living” trust.
Various types of living trusts serve purposes like avoiding probate, minimizing estate taxes, and ensuring ongoing property management.
The main draw of a living trust lies in bypassing the probate process, which otherwise legally recognizes and enforces the distribution of your estate. The traditional probate process can be lengthy and costly, whittling down the estate’s value with legal and court expenses. However, not every estate faces probate risks, and a living trust may not be the ideal solution for everyone.
Assets placed into a living trust are exempt from probate. Upon your passing, the designated successor trustee will manage the direct transfer of assets to your beneficiaries as specified in the trust agreement. This transfer can be surprisingly swift and generally incurs no legal or court fees. At the completion of these transfers, the living trust no longer exists, its purpose fulfilled.
Fortunately, establishing a basic living trust is akin to crafting a will, often avoidable of lawyer intervention. Accessible self-help resources, including comprehensive books and software, can guide you in creating a valid Declaration of Trust. While some questions may necessitate professional advice, the process shouldn’t necessitate the expense of full legal counsel.
Although living trusts necessitate meticulous record-keeping—like changing deeds to reflect your status as trustee of your living trust—it’s no longer as daunting thanks to living trusts becoming more mainstream and accepted.
Unlike a will, which becomes public upon probate, the terms of a living trust remain private, providing added discretion concerning your estate distribution.
Regrettably, living trusts offer no protection against creditors. Assets within the trust can be targeted by creditor claims just as personally held assets would be. However, the identifiability of real estate ownership can make it easier for creditors to pursue debts associated with inherited property, while non-real estate assets might provide more obscurity.
Moreover, probate proceedings can serve to protect against creditors by enforcing claim filing deadlines, beyond which creditors cannot collect.
Absolutely. A will is a significant safety net for any assets unassigned to the trust, such as those acquired shortly before death. Your will can specify a recipient for assets not already delineated within the trust. Without a will, your estate falls under state laws, which may not align with your preferences.
A standard living trust focused on probate-avoidance does not impact estate taxes. Federal estate tax currently pertains only to estates exceeding a substantial threshold, though legislative changes could affect this exemption. Notably, AB trusts were once a common tax reduction strategy, but are now less essential due to sizeable personal exemptions and spouse “portability.”
For more information on living trusts or to discuss your estate planning needs, contact James H. Wilson Law Firm at 804.740.6464. Our legal team is dedicated to ensuring your assets are protected and your legacy preserved.