Estate planning is a significant part of securing your financial future and ensuring your assets pass to your loved ones smoothly. One powerful tool at your disposal in Virginia is a living trust. As opposed to a will, a living trust comes into play while you are still alive and offers a wide array of benefits.
A living trust, also known as a revocable trust, holds your assets during your lifetime and transfers them to your beneficiaries after your death.
The workings of a living trust
A living trust starts functioning when you, the trust maker, transfer your assets into it. You appoint a trustee, which can be yourself, to manage these assets. The management includes any selling, investing or otherwise handling of the assets. After your death, a successor trustee you designate takes over the administration of the trust and distributes the assets to your named beneficiaries.
Advantages of a living trust
There are numerous advantages to including living trusts in your estate plan. First, they provide privacy. Unlike a will, a living trust does not become public record upon your death, so the details of your estate remain confidential. Second, living trusts help to avoid probate. Probate is the court process of validating a will, which can be lengthy and expensive. As a living trust transfers assets outside of probate, your beneficiaries receive their inheritances more quickly and with fewer costs.
Limitations of a living trust
Despite its benefits, a living trust also has limitations. It does not eliminate estate taxes, and setting up a trust can be more complex and expensive initially than drafting a will. Additionally, a living trust only covers the assets you transfer into it. Any assets not in the trust will still go through probate unless they have a designated beneficiary or joint owner.
Understanding the concept of living trusts can help you make informed decisions about your estate plan. Remember to always consider your unique circumstances and needs when deciding on the tools to include in your estate plan.