Do you have a living trust? If not, do you know who will take care of your assets once you can no longer manage them yourself? The following three questions offer a broad overview of living trusts and how they can benefit you.
Why would you want a living trust?
Before answering the question of why you would need one, it's important to understand what it means to have a living trust. A living trust is a legal document that transfers the management of your property to another person. It is drawn up while you are still alive, hence the term "living" trust.
When you establish this type of agreement, you are assured that a person of your choosing has the legal right to manage your property if you become incapacitated. Even if you do not become incapacitated, you might desire a living trust if you need help managing the responsibilities of your estate.
It is important to note that a living trust must be prepared while you still have the mental capacity to do so. For example, if you are diagnosed with Alzheimer's disease, you may need a medical exam to prove that you still have the mental capacity to understand and sign a binding legal contract. Otherwise, the validity of your living trust could be challenged by a friend or family member down the road.
Who is involved with the preparation of your living trust?
When drawing up a living trust, there are three parties (besides your lawyer) involved:
- The grantor (you) establishes the living trust.
- The trustee is the person you appoint to manage your assets.
- The beneficiary is the person who receives the benefits of your living trust.
Keep in mind that you may choose to be both the grantor and the trustee of the living trust until the time of your death. If you decide to share the trustee responsibilities with another person, such as your spouse, you will both maintain full control of your assets for the remainder of your lives.
Can you change the terms of your trust after it is established?
If you design your trust as a revocable living trust, it can be dissolved or revised at any time. Changes cannot be made to an irrevocable living trust. However, the terms of either kind of trust become irrevocable after your death.
A living trust is an estate planning tool that should be discussed with your lawyer before any final decisions are made. Your lawyer or accountant can also help you determine which type of trust provides you with the best tax benefits for your personal situation. Contact professionals such as O'Connor, Mikita & Davidson for more information.