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Tags: finance, estate plan trusts, creating a living trust
 Probate is the legal process by which a court administers the estate of a deceased person by resolving all claims and distributing the deceased person's property through an executor according to a valid will. However, if an estate is probated or distributed and closed through the legal process, the process can take months, or even years, which means that the property’s ownership is in limbo.
And of course there are the expenses involved. Get around this by creating a living trust to avoid probate. The biggest advantage in making one is that any property left through it doesn't have to go through probate court. This is basically an arrangement under which someone gives assets, the grantor, to another person, called a trustee, who holds legal title to said asset for the benefit of another person, called a beneficiary.
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You can be the grantor, the trustee and even a beneficiary of your own living trust (with another person of course), thereby keeping full control over all property held therein. A living or inter vivos trust is simply an entity you create while you're alive, rather than one that is created upon your death.
The differing kinds of this probate buster not only helps you to avoid probate, but also helps in reducing the estate taxes to be paid, and can set up long-term property management at the same time. In probate, the court inventories and appraises the property, pay off debts and taxes, and distribute what’s left to the beneficiaries according to the will.
However, when there is a living trust, any named surviving trustee can transfer your assets quickly and easily, without having to go through the hassles of probate. The result is that more of the assets you leave behind actually goes to the people you want to inherit it. Typically, a basic living trust is probably all anyone would really need.
It allows your assets to avoid probate and be quickly and efficiently passed to your named beneficiaries, without the hassles and expense of probate court proceedings. There are three parties involved in creating a living trust. The grantor is the person who has passed assets over to this legal entity—this is you.
The trustees are the people that you appoint to have the power to run and look after the assets therein for the beneficiaries. They can decide what particular assets will be owned and who will benefit unless a specific beneficiary is named in the trust deed. Often, the trustees are also the grantor and other people they know.
And of course the beneficiaries are the people benefiting from the assets or property that has been set aside, either through distributions of either income or capital. To create a basic living trust, you write out a document called a declaration of trust, which is similar to a will, naming yourself as trustee.
If you and your spouse created it together, then both of you can be co-trustees. You need to decide what assets to place in it—big-ticket items such as real property or actual money. You then transfer ownership of said assets to yourself in your capacity as trustee. You also need to decide who will be the beneficiaries.
The usual suspects are typically family members, friends, or charities—don’t forget to name alternate beneficiaries in case something happens to your first choices. If minor children or incapacitated adults are named beneficiaries give another person authority as property guardian or custodian. And don’t forget to name a replacement trustee for you after you die.
When making your living trust, also make a back-up will. This will ensure that any property not in trust will go to the beneficiaries you want and not go through the intestate process. A living trust removes the stress of worrying about the probate process.
About the author
The author of this article Rick Goldfeller is a successful underground Financial Analyst who has been advising and coaching individuals for many years. Rick recently published a book on how to manage your money and attract Wealth and Financial Freedom. More info on his Finance Planning course is available HERE.
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