Planning for the end of your life is not an easy task, but doing so will make life easier for your loved ones, and isn’t that the most important thing? Putting major assets into a living trust might be another way to protect your heirs.
Understanding how a living trust works will help you decide whether or not it is a tool that can work for you. At its simplest, a living trust is a legal document that owns or holds title to your assets for your own benefit (with you as the trustee) while you are still living. If you should become disabled or die, it transfers these assets via your “successor trustee” to your heirs. These basics are among several useful points covered in a Fox News article, “Why Should I Put My Home in a Living Trust?”
Living trust versus a will. A living trust is similar to a will in that it’s a legal document that instructs how to distribute your possessions after your death. If you have a will when you pass away, your estate goes into probate where the court monitors the distribution of your estate. But if you set up a living trust while you're alive, you’ll work with an attorney to do the paperwork ahead of time and avoid court supervision of the most valuable items you own after you're gone
Whatever you place in the trust can be distributed in just weeks after you pass. Also, a living trust is private, not like a will, which is a public document.
A living trust is typically funded with your assets, such as your home. You also should put any vacation homes in different states in the trust to avoid separate probate proceedings in those states. To place property in a living trust, your estate planning attorney will draw up a new deed in the name of the trust and maintain a list of what's in the trust to make it easier for your successor trustee.
Revocable or an irrevocable trust. The creator of the trust also needs to opt for either a revocable or an irrevocable trust. A revocable trust is one that lets you change what property is in the trust—or even the very existence of the trust itself. This is good for someone who wants to stay in control over his or her assets, right up until the moment he or she can no longer mentally do so, at which point a designated trustee is ready to assume control.
You’ll want to speak with an experienced estate planning attorney to determine if an irrevocable trust is suitable for your situation. Once an irrevocable trust is created and assets are placed in the trust, they cannot be taken out. There are benefits to this kind of trust: assets are not included in your taxable estate.
An estate planning attorney will help you examine the pros and cons of different kinds of trusts.
Reference: Fox News (October 5, 2016) “Why Should I Put My Home in a Living Trust?”