Top Ten Reasons You Need A Living Trust
Now, you might say: “I don’t need a trust. I don’t have a large estate. I don’t need fancy planning. It’s too expensive anyway. And complicated. So I just don’t need a trust!” And so you ask: “Why would I want to have a trust?” I’m going to describe in a few simple words why you will benefit from a trust. First, let me explain what a trust is. A trust is a . . .
Step 1: Why You Might Need A Trust
You might say, "I don't have a large estate." "I don't need a trust." "I don't want to spend that kind of money to set up an estate plan." Let me give you a few good reasons why you might need a trust.
Step 2: What Is A Trust?
First of all, let me tell you what a trust is: It's a separate entity, a written document that creates a trust into which you transfer the ownership of your assets. You act as the manager of that trust, or the trustee, and you name the beneficiaries -- who is going to receive those assets upon your death. Think of it like a separate business. You have a company, a corporation into which you have placed your business. You are the managing partner of that company, and you have named someone to take your place if you can't act any longer.
Step 3: What Are The Benefits Of A Trust?
So what does this do? This creates an entity that is there in the event of your death.
Step 4: Benefit 1 - It Saves Money
So the first benefit is, it saves money. Now you might wonder, "Why does it save money? I know it costs more money to have a trust prepared than to have a will prepared." Yes, it does. But in the long run the trust is much less expensive, because it avoids the probate process upon your death. If you die with a will, the will has to be produced to the probate court, and the court supervises the distribution of your estate, and all of that costs 5-10% of the value of your estate to settle it. So the trust might cost a little bit more than a will at the beginning, but it eliminates the probate and saves those costs in the end, upon your death.
Step 5: Benefit 2 - Control Your Assets
Another reason is, you retain control of all your assets. You don't have to give it up and put it in the hands of a third party. You can still buy, or sell, or re-invest, or whatever you want to do with those assets. You are still in full control.
Step 6: Benefit 3 - Reduce Settlement Time
Another benefit is that you eliminate the time that it takes to settle your estate in the event of your death. If you died without a trust, the estate would go through probate. On the average, probate takes 1-2 years. A trust can be settled in as little as 2 or 3 weeks. So it saves the long drawn-out settlement process that causes contention and disputes among family members.
Step 7: Benefit 4 - Privacy
Also, the trust remains private. If your estate goes through probate, all of those probate records are public records. Anybody has access to them. The trust remains a private family document. It does not have to be recorded or filed anywhere. Only those people that have the need to know about the trust's estate will be given that information. So it remains a private document. And then it remains less expensive in the long run to maintain the trust than in having to go through the probate process.
Step 8: Benefit 5 - No Government Forms
Another benefit is, there are no government forms to file. The IRS calls this kind of a trust a "grantor trust," meaning it doesn't file a separate tax return. It doesn't have to get a separate ID number. It just reports all the income on your 1040 tax return and uses your social security number as the ID number. So there's no additional forms to file.
Step 9: Benefit 6 - Low Maintenance
One of the other benefits is, the trust is low-maintenance. Once the trust is established, you just need to make sure you've kept your assets titled in the name of the trust. That means when you buy a new piece of real estate, you'll have the title company issue the deed to the trust name. When you open a new bank account you'll open it in the name of your trust. And you'll keep a running list of the assets that are in the trust. But there's not any other maintenance that has to be done, any annual reviews or reports that have to be made.
Step 10: Benefit 7 - Designate Special Gifts
Also, in your trust you can designate special gifts. If you wanted your jewelry collection to go to your favorite nephew or niece, or if you have some antiques or some other business property that you want to go to a specific individual, you can outline that specifically in your trust and it goes directly to that person.
Step 11: Benefit 8 - Estate Tax
One major benefit, of course, is the estate tax. You may remove or eliminate the estate tax altogether, or at least reduce it. Because, by the use of a trust, you can get double the estate tax exemption for a married couple that you would normally get.
Step 12: Benefit 9 - The Trust acts as a Prenuptial Agreement
The trust can act as a prenuptial agreement. If you're going to get married for a second time, or even for the first time, and you're worried about your spouse leaving you after a few years, you can actually set up a trust and put your property into the trust before your marriage, and that trust becomes your sole and separate property account. Your spouse has no claim on those assets unless you somehow disclaim them or make your spouse a new partner in the trust.
Step 13: Benefit 10 - Eliminate Issues Relating to Incapacity
Then there's a bonus: the trust also eliminates the problem in the event of your incapacity. Because your trust says that in the event of your death or incapacity, you have named someone to step into your shoes, manage the assets in the trust, all without having to go through the court-supervised process of a conservatorship.
Step 14: Conclusion
These are some of the major benefits of a revocable living trust. There might be even more that you can think of. For more information I invite you to go to LivingTrustDr.com.
