What is a Trust?
A trust is created when property of some sort (an account, a home, some personal property, any property) is transferred to an individual "in trust" for the benefit of some other individual, group of individuals or organization. A trust can hold title to very little property or millions of dollars of property. Trusts can be established during your life, at your death or after your death. Trusts can be established to benefit you, your family, your descendants, a social or religious organization or any myriad of individuals, companies or organizations. Put simply, a trust is a vehicle by which one person holds property for the benefit of another person and typically includes detailed specifications on how, when or for whom that property is to be used.
Revocable Living Trust
A Revocable Living Trust - usually just called a living trust - is the most common type of trust created. It is created by you, during your life and can typically be changed, amended or terminated at any time before your death. The trust is formally created by a "Trust Agreement" or "Trust Declaration." After creating the trust, you would usually transfer all of your assets and property into the trust. You typically serve as both the "trustee" managing the assets, as well as the "beneficiary" for the benefit of whom the assets are being held or managed. Accordingly, day-to-day management and ownership of property transferred to your trust during your lifetime is not much different than normal non-trust ownership.
Five key benefits to creating a Revocable Living Trust:
1. assets in the trust avoid the court-supervised probate process (thus saving time, money and headache) at the time of your death
2. trust ownership is an effective tool in planning for potential periods of mental or physical incapacity, when a successor trustee can immediately become responsible for management of trust property
3. a trust provides a detailed distribution plan of your property upon your death, as determined by you
4. if desired, a trust allows you to designate what happens to your property in a manner other than an outright gift (for example, property could be held until an intended recipient reaches a particular age, could be given at varying intervals, or could be designated for particular specific uses)
5. a trust can often be structured in a manner to significantly reduce estate tax liability
You Should Consider a Revocable Living Trust if:
you want to simplify your estate plan and save the time and money of the court-supervised probate process
you want to plan for potential periods of mental or physical incapacity
you have property which requires active management
you have significant assets
you want your property distributed in a manner other than simple outright gifts
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