What is a Living Trust?

With the passing of my Stepmother, I have learned a lot about Living Trusts and have discovered that this is something we should all think seriously about. As adults, home owners and small business owners, it is important to protect what we have worked so hard to build. You always hear about how important it is to create a will, but you really don't realize the importance of that until you lose a loved one and then have to deal with the ramifications.

There are differences between a Living Trust and a Will. A Living Trust is not what I had originally thought it was, it is actually a legal document similar to a Will, but it creates a Trust during a person's lifetime in order to save money on taxes and possibly to set up long term property management. A Trust is a relationship where the property is managed by one person for the benefit of another. Living Trusts are also designed to avoid probate proceedings and may also reduce taxes on inheritance property. These Trusts are used often because they can allow assets to be passed on to heirs without going through the probate process. These Trusts, if created properly can also help reduce future legal contests and arguing.

A Will on the other hand is a legal declaration where one person designates another person to manage their estate and provides for the transfer of that property at death. Basically a Will is limited to real property and indicates how you want that property distributed at the time of your death. It is revocable and subject to amendment at any time during your lifetime. You can draft your own Will with or without the aid of an attorney, but depending on your location, there may be more limitations. There is no legal requirement that a Will has to be created by an attorney, but there are many problems that can arise if an attorney is not active in the creation of the Will. Many of the problems could be due to items that were innocently left out of the Will instead of what may be placed in the Will. Wills are subject to probate proceedings, which can tie up the estate for a year or longer and possibly incur court fees. A Will does provide court supervision for handling beneficiary challenges and creditor disputes.

The popularity of a Living Trust has expanded in recent years as many more people realize the estate planning benefits. They cost more to prepare but the avoidance of probate costs can more than offset the up front costs of creating the Living Trust. Regarding my Father's situation, the Living Trust was the best option for him. Each person has their own set of needs and anticipated goals, so please be sure to research what you want to do before committing one way or another.

If you are considering creating a Will, a Living Trust, or even a Living Will (we didn't even touch on that tonight) it is highly recommended that you do consult a legal professional prior to creating any one of these documents. There are so many loopholes and rules to trip up a regular person. We have even seen lawyers get hung up on the various legal maneuverings of wills, versus trusts. If you are interested, Pre-Paid Legal Services may be a great place to start for obtaining some version of legal representation or at best a great place to start to obtain legal advice. As part of the Standard Family Plan you can get a will created for you at no additional charge with free yearly reviews and updates. You can also have a directive to physician/living will prepared at no additional charge with free yearly reviews and updates and limited assistance for probate proceedings.

If you have questions about what Pre-Paid Legal Services may be able to do for you with regards to Wills or Living Trusts, or any other general questions regarding Pre-Paid Legal Services, please feel free to e-mail us at hawgwash1@yahoo.com. We would love to help you with your questions.

Until tomorrow...