When you think about creating an estate plan for the distribution of your estate assets after you are gone, you probably envision using a Last Will and Testament as the vehicle by which your estate will be distributed. A Will certainly can be used to pass down your assets to loved ones; however, it is not the only option. A living trust is another estate planning tool that is often used to accomplish the distribution of an estate. The Grand Forks living trust attorneys at German Law Group explain why a living trust may be a better choice as your primary estate planning tool for the distribution of your estate assets.
What Can a Last Will and Testament Do?
You probably already have a good idea what a Last Will and Testament can do for you within your estate plan; however, it never hurts to be clear. At its most basic, a Will is a legal document that communicates your final wishes pertaining to possessions and assets. Your Will allows you to make both specific and general gifts. For example, you might make a specific gift of your primary home to your oldest adult child. Instead, you might decide to gift a percentage of your estate to each adult child. For example, you could gift 50 percent of your entire estate to each of your two adult children. In addition, when you create your Will you appoint someone as your Executor to oversee the administration of your estate. Finally, your Will offers you the only official opportunity you will have to nominate a Guardian for your minor children in the event one is ever needed.
What Can a Living Trust Do?
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor (also referred to as a Maker or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. All trusts are first divided into one of two categories – testamentary or inter vivos – the latter of which is more commonly referred to as a living trust. A testamentary trust is a trust that arises upon the death of the Settlor and which is typically activated by a provision in the Settlor’s Will. A living trust is a trust that takes effect as soon as all the legalities of creation are in place. A living trust, therefore, allows you to do more than a Will with regard to structuring the distribution of your estate assets after your death.
Why Is a Living Trust a Better Choice?
Although a Will is sufficient to ensure that you do not leave behind an intestate estate and that your estate is distributed according to your wishes, there are several things a living trust can also do that a Will cannot, including:
- Protect the inheritance of a minor child –because a minor child cannot inherit directly from your estate, a trust is a better option to guard your child’s inheritance until he/she reaches the age of majority. In addition, using a trust to protect that inheritance allows you to decide who will manage the assets held in the trust until your child is old enough to inherit them directly.
- Avoid probate – probate is the legal process that follows the death of an individual. Probate can be time-consuming and costly. A Will is generally required to go through the probate process as are most assets distributed through the provisions in a Will. Trust assets, on the other hand, bypass the probate process entirely, allowing them to be distributed immediately after your death if you so choose. If your beneficiaries will need those assets right away, a trust is a better option.
- Staggering distributions to beneficiaries – gifts made in your Will are distributed in one lump sum and become the unconditional property of the beneficiary once the transfer of ownership is complete. If you have a young, inexperienced, or spendthrift beneficiary, to whom gifting a lump sum of money is not a good idea, a trust might be a better choice. A Trustee manages the assets held in a trust and the Settlor creates the terms of the trust, allowing you to retain a certain degree of control over gifts you make using a trust. It also allows you to distribute the beneficiary’s inheritance in small sums over a greater period of time. Furthermore, you can even dictate how the trust assets are to be used, if you so choose, using the trust terms, making a living trust an excellent choice if you are concerned about how your assets will be used.
Contact Grand Forks Living Trust Attorneys
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about using a living trust to distribute your estate, contact the Grand Forks living trust attorneys at German Law Group by calling 701-738-0060 to schedule an appointment.