It’s no easy task to build a large savings account and accumulate other assets during your working years. As you near retirement, you would like to ensure that your hard-earned money goes to the people you choose and not to a government agency. However, this won’t just happen automatically. You need to engage in some careful planning to avoid legal fees and taxes taking a big chunk of what you intended to leave for your loved ones. Creating a living trust can help you do just that.
What is a Living Trust?
A living trust and a will both provide instructions for how to distribute your assets after your death. The most important way they differ is that a living trust goes into effect during your lifetime. If you opt for a will, it only goes into effect after your death and requires the administrator to go through the probate process. This can cost a significant amount of money. A living trust, on the other hand, does not require probate. Although it costs more upfront to create this type of estate plan, you pay less in fees overall.
Advantages of Using a Living Trust as Your Estate Plan
When you opt for a living trust, the documents become valid immediately after you sign them. The law does not require you to have a witness to your signature, such as a notary public, but you may wish to do so for your own peace of mind. After your living trust becomes legal, you can manage the assets included in it any way you see fit. Additionally, a living trust is not a matter of public record, as a will is and you are able to dictate what happens to your assets before and after your death.
A living trust has tax advantages at the federal and state levels that a will does not have. It is also less likely that someone will choose to contest a living trust as opposed to a will. If you intend to leave assets to a minor child or grandchild or an adult with special needs, you are the one who gets to determine when that person can access the assets you have left for him or her. A judge will not allow the freezing of assets in a living trust as long as it currently contains funds. We recommend that you have the following assets transferred to the name of your living trust to avoid even the possibility of probate:
- Business ownership
- Certificates of deposit
- Mutual funds
- Real estate
Are You Ready to Create a Living Trust?
In order for a living trust to be legal, it must have a creator, a trustee to manage assets, and at least one beneficiary. At Aura Wealth Advisors, we recommend that you name yourself the trustee to retain complete control over this type of estate plan. We also invite you to schedule a consultation with one of our wealth management advisors to ensure that you’re on the right track with planning and executing your living trust.