Living Trusts – Your Estate Planning Contingency Plan

Contrary to popular belief, estate planning is not just for the super-rich. Estate planning is a necessity for everyone. Living trusts are an often overlooked—yet powerful—tool in estate planning.

What is a Living Trust?

A trust is a fiduciary arrangement where one party, known as the trustee, holds legal title to property for the benefit of another person, the beneficiary. Generally, there are two types of trusts: irrevocable and revocable. Revocable trusts (commonly known as “living trusts”) can be changed or revoked (cancelled) at any time, whereas an irrevocable trust cannot. Check out our blog post Revocable vs. Irrevocable Trusts: Helping You Plan for Your Future for further comparison of revocable and irrevocable trusts.

What property can be held in a living trust?

Almost any property of value can be placed in a living trust. Property commonly held in a living trust includes:

1. Cash accounts
2. Investments
3. Real estate
4. Life insurance policies
5. Vehicles
6. Jewelry and other household valuables

Living Trusts vs Wills – is there a difference?

Wills and trusts are both estate planning tools. Like a will, a living trust is a legal document that contains your instructions for what you want to happen to your property when you die.
A will must be examined and validated by the probate court before being enforced (this process is known as “probate”). The probate process can be very long and expensive if family members contest the will. Because a will can only go into effect after you die – it provides little to no protection if you become incapacitated. A living trust, on the other hand, can go into effect before you die. A living trust avoids probate while allowing you to retain control of your property while you are living (even if incapacitated) and providing instructions for the dispensation of property after you die.

If I have a living will, do I still need a will?

Yes. Think of a will as your estate planning safety net – a backup device for the property that you forget to transfer to your living trust. After your death, a will catches the forgotten property and sends it into your trust. The property can then be distributed as part of your overall living trust plan. If you don’t have a will, any property that isn’t transferred by living trust will be distributed according to the state’s intestate succession laws. These laws may not distribute your forgotten property the way you would have chosen.

Wills and trusts are both essential legal tools in estate planning. If you are interested in establishing a living trust, contact the Wills, Trusts, and Estate Planning attorneys at McNeelyLaw for all your estate planning needs.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.