When it comes to making your estate plans, creating a living trust has been a popular choice for many of our clients in Georgia. You may have heard a friend or relative talk about setting up a living trust and may have wondered if it is right for you. Like any estate planning tool, living trusts break down into many different categories, each with its own purpose, as well as upsides and downsides. At our office, we help many clients decide whether to go with a living trust or not. Here is an informative article with some of the considerations that are important to help you decide.
What Is a Living Trust?
In simple terms, a living trust is a container for a person’s assets. It is created by the trustor during their lifetime. The trustor may choose which assets to place in the trust and may assign beneficiaries to each asset, as well as a designated successor trustee who will be in charge of managing the trust once the trustor (the creator of the trust) passes away.
Living trusts are a popular choice for those looking to have greater control and flexibility over how their assets will be passed on to the next generation, as well as for those looking to avoid the probate process in Georgia. Unlike wills, trusts do not become public record and are kept private. Assets in a trust can usually be distributed directly to beneficiaries according to the trustor’s wishes without requiring the interference of a judge or probate court. Certain types of living trusts may also provide some asset protection from creditors and costly life events such as divorce.
Is Having a Living Trust Better Than a Will?
Given the rising popularity of living trusts, many clients often ask us if having a living trust is better than having a will. The answer is usually, “it depends”. Wills and trusts are just two of many different tools one can have in their estate planning toolbox. They are designed to do different things yet can work together — it all depends on your estate planning goals and current financial situation.
Having a will is the bare minimum for anyone wanting to plan their estate. If you die without a will, your heirs will need to go through a long process before your assets can be distributed. A will also serves as a backup plan for any property you did not include in your living trust. As a rule of thumb, a living trust is not a replacement for a will, and having a well-written will is fundamental.
A living trust can be complementary to your will and help speed up the process of distributing your assets without the need for probate. You can also have more control over your beneficiaries by adding specific directions regarding who gets what assets and when. There may also be tax advantages in placing your assets into a trust.
How Many Different Types of Trusts Are There?
There are several different types of living trusts split into two main categories: revocable and irrevocable. As the name says, a revocable trust can be changed, amended, or canceled at any point during the trustor’s lifetime. If you choose a revocable trust, you may add or remove assets and beneficiaries at any time. An irrevocable trust cannot be easily changed or canceled once it is created.
You can choose to make your living trust revocable or irrevocable. Besides living trusts, there are countless other trusts such as asset protection trusts, charitable trusts, special needs trusts, and irrevocable life insurance trusts. An experienced estate planning attorney can make recommendations regarding which type of trust is best for your situation and estate planning goals.
How Do I Know if a Living Trust Is Right for Me?
One of the key differences between setting up a living trust versus simply having a will is that with a trust you will be doing a lot of the work upfront. The process of placing the assets into the trust and coping with the costs associated with it is done during your lifetime. With a will, there is a lot less work done ahead of time, and lifetime costs are a fraction of what a living trust would be. However, your heirs will need to manage the cost of probating your estate and working to distribute all your assets after you die.
For those who have a moderate to high net worth or a complicated family situation, a living trust is almost certainly a better choice than simply having a will. However, the state of Georgia has a simplified probate process for those whose estate can be considered small (with a total value of less than $10,000.00). If you believe that your estate may end up qualifying for the simplified probate process, it may not make sense for you to set up a living trust. The best way of finding out if a living trust is the right choice for your estate plans is to sit down with an estate planning attorney to get a full understanding of your options. At Oren Ross & Associates, we have assisted many Atlanta clients and their families to put together a comprehensive estate plan that works for them. Contact us to schedule a free in-depth consultation to see which estate planning tools are best for you.