Living Trust

A trust is a set up by which one individual called a trustee has the ownership of property for the benefit of another person who is called the beneficiary. Under this concept, anyone can be a trustee of his own living trust, maintaining the right over the property under trust.

A "living trust" is nothing more than a trust you make while living, compared to one that is made to effect upon ones death in accordance with the provisions of a will.

There are several living trusts that can make you eschew court approval, decrease estate tax liability, and create property management on a long-term basis.

When you ask somebody why he keeps working hard, his answer may be that his hard work is not only for himself but also for his children, by leaving something for them. It is quite understandable therefore that you do not want to exhaust what you have accumulated just for the lawyers, through their professional fees.

This is the advantage of a living trust. They do not produce any beneficial economic effects while you are still living, but the dividends will be paid later on, when you will realized that you do not need to have it probated with the costly probate fees. At this juncture, you may want to know what probate is all about. Probate is a judicial procedure characterized by acts of inventory and valuation of the properties, settling liabilities and taxes.

After the payment of debts, whatever remains of the property shall be disposed of in accordance with the wishes of the testator, meaning the one who made the last will and testament. When you create a living trust - an arrangement by which you have the property as a trustee - the surviving members of your family can pass to themselves ownership of the subject properties without the costly probate. Because of this, people to whom you intend your properties to go, get much more of it due to savings.

Types of Living Trusts

There are two common types of living trusts: a basic living trust (for single or married individuals), which is not subject to probate, and an AB trust, which is also not subject to probate and saves much on taxes pertaining to the estate.

A basic living trust enables you to avoid probate proceedings and effectively vest ownership to the beneficiaries you designated, doing away with the time consuming and costly court proceedings. Married individuals can utilize a single basic living trust to cover the community properties, and the exclusive properties of either of them.

Creating a Trust

To make a basic living trust, you execute an act termed as declaration of trust, which is analogous to a will. In such a scenario, you will be calling yourself as a trustee - meaning the person who takes care of the property in trust. If both spouses make a trust together, both of them will be trustees of each other.

Thereafter, you do positive acts of transferring ownership in your favor, of all or only some of your properties, but this time, in your capacity as a trustee.

For instance, you could execute a document conveying ownership to an expensive car from yourself to yourself, but now in your capacity as a trustee. Because of the nature of this living trust arrangement in which you are also the trustee, you do not relinquish control of the properties subject of your trust.

Funding Living Trust | Living Trust Information |