A living trust can be an important component of estate planning and can protect family members. It is a legal document that an individual creates to guard their assets and also indicates where the assets will go once the person has passed away. These assets can include real estate, valuable personal property, bank accounts, and investments.
The person who has the assets can be named as the trustee, and spouses are permitted to be co-trustees. A trusted friend, relative, professional advisor, or corporate trustee can be designated. Living trusts can be revocable or irrevocable. A revocable living trust means that it can be changed or canceled during the person’s lifetime and irrevocable means that it cannot.
How are Living Trusts Constructed?
There are three main components to a living trust: grantor, trustee, and beneficiaries. Grantors are the people who own the assets and create trusts, and trustees manage the trust assets. Beneficiaries are the ones who benefit from the trust in the present and future. The grantor transfers their assets into the living trust, the trustee manages the assets, and after the grantor’s death, the beneficiaries inherit the assets.
The grantor can work with a lawyer to create a trust arrangement, which is written into a trust instrument. This details who the pertinent parties are along with the assets or trust property. The trust instrument also specifies how the trust property will be managed, including any transfers to beneficiaries.
What are the Benefits of Having a Living Trust?
A living trust allows assets to be transferred after the owner passes away without having to navigate the probate process. Probate can be expensive and can also take a long time. A living trust is also more private than a will since wills are public documents that can be contested by disgruntled relatives and others. Trusts are much harder to challenge.
A living trust specifies how the assets are to be handled. Since everything is decided in advance, the beneficiaries will know what they are entitled to without much room for disagreement. One of the best benefits of a living trust is that they ensure that the owner’s final wishes are carried out.
What Happens After the Grantor Passes Away?
When creating the trust arrangement, a successor trustee needs to be named. This individual must carry out the terms of the trust. It is important to know that once the grantor passes away, the trust is then irrevocable and cannot be changed. The successor will then collect the trust inventory information and distribute it as the trust instructs. This process can take up to a few months, which is shorter than the probate process, which can take six months up to an entire year.
Are There Downsides to a Living Trust?
A living trust may require more time and expense to set up than a will, and a grantor must make sure that ownership of all assets listed in the document are legally transferred to them as trustee. Anything that does not have an ownership title document can be listed on an Assignment of Property document. Once the living trust is completed, there is little work involved while the grantor is still alive other than maintaining records of whenever property is transferred out of the trust. There is no need for separate income tax returns or records.
Another concern is lingering debt. Once the grantor has passed away, the beneficiaries may settle any outstanding valid debts, taxes, and funeral costs. If there are large, outstanding debts, creditors may be entitled to be reimbursed from the trust property without a specific cutoff date. When a will is probated, there is a six month time limit for creditors.
Chester County Wills and Estates Lawyers at Eckell Sparks Help Clients with Living Trusts
A knowledgeable Chester County wills and estates lawyer at Eckell, Sparks, Levy, Auerbach, Monte, Sloane, Matthews & Auslander, P.C. can design an estate plan to best serve your interests and protect your beneficiaries. For a free consultation, call us at 610-565-3701 or complete our online form. Located in Media and West Chester, Pennsylvania, we serve clients throughout Delaware County, Chester County, and Montgomery County.