There comes a time for everyone--maybe when you're in your forties or fifties--when you need to begin planning for the just-in-case moments of life. John F. Kennedy said in a State of the Union address that, "The time to repair the roof is when the sun is shining." You don't want to wait until you're incapacitated or disabled--in other words, you want to be smart about it.
What is a living trust?
An estate plan based on a living trust helps protect you and secure your family's future. At its simplest, a trust is a legal agreement between the grantor (the person creating the trust), the trustee (the person responsible for administering the trust) and the beneficiaries. With a living trust--also called a revocable living trust--the grantor, trustee and beneficiary are the same person, with another trustee specified should the creator pass away or become mentally incapacitated.
What's the difference between a revocable trust and an irrevocable trust?
A revocable living trust can be modified up until the grantor's death or incapacity. An irrevocable trust cannot be modified or terminated without permission of the beneficiary. Once the grantor transfers the assets, he or she removes all rights of ownership to the irrevocable trust and assets.
Why a trust is different than a will
A key difference between the two is that a will goes into effect after you die, while a trust takes effect after it's created. There are features of a trust that set it apart:
- Quick asset transfer: Asset transfer can typically happen much faster than with a will because the probate court isn't involved with a trust.
- Cost reduction: Avoiding probate and estate taxes can save you money.
- Privacy: Your financial affairs won't become part of the public record.
- Control: You can control what happens to your assets after you have passed away.
Just like you don't want to be your own doctor, you'll want to leave this to an estate planning professional. Your attorney will make sure your plan is complete and follows your wishes for your end of life and transferring your assets.