Do you need a living trust?

When deciding how you want to transfer assets to your heirs, there are many wealth management options available.

Depending on your financial situation, age and other factors, estate planning can be more or less a headache. This can be especially true if you're transferring liquid funds in your checking account, real estate, life insurance benefits and other assets. You might have heard of a living trust, one of the many ways to pass your estate on to your heirs.

What's a living trust?
This estate planning strategy is often used so that heirs can avoid the at-times-difficult probate process, which is the court-supervised distribution of your assets as determined by your will. When you set up a trust while you are living, you and your spouse can transfer all of your assets to it and name a trustee, who can be yourself or another individual you deem fit. You can also name a successor trustee to manage the trust following your death.

While you are living, you can make changes to or revoke the trust if it is revocable. This is advantageous if you need to change the distribution terms because, for example, you have new grandchildren or a relationship with one of your children dissolves. Once you die, the trust terms determine how the assets are distributed separately from what is outlined in your will.

Trusts can also be useful for lowering the taxes paid on your estate.

What are the benefits of having a living trust?
In the event that you are not able to manage your own assets, a living trust is beneficial. This is not only true in the case of your death. If, for instance, you are incapacitated because you slip into a coma, your appointed trustee can manage your assets. In addition to ensuring the proper distribution of your estate, your successor trustee will also ensure that your debts and taxes are paid, similar to the role of an executor of a will.

If you don't appoint a successor trustee, your property assets will be subject to a probate court proceeding known as conservatorship, in which a judge determines whether you are able to manage your own assets. If you are deemed incapacitated, a conservator will be appointed to take care of your assets and regularly report to the court.

Who should get a living trust?
Most everyone who is planning for the future of their estate can benefit from a living trust. It can be especially helpful for passing on large assets. If, for instance, you own a restaurant and want to transition ownership to your child after your death, a living trust can facilitate your succession planning strategy.

This wealth management plan is also beneficial if you have very specific desires for how your assets should be handled following your death.

What are some disadvantages of a living trust?
While there are many benefits to placing your assets in a trust, there are also pitfalls. Given that this option does not involve court intervention, your successor trustee could act in a way that does not align with your expectations, which is why it is important to give significant consideration to all your choices before selecting one. Additionally, starting a living trust can be expensive depending on the size of your assets, and you'll have to retitle any new assets in the name of the trust.

As with creating a will, speak with legal and financial professionals before starting a trust. They can help you decide if this option is best for you and determine how you can best utilize a living trust.

For more information about wealth management strategies, contact Landmark Bank.

Investment products and services are not FDIC insured, not insured by any federal government agency, not a deposit or bank obligation, not financial institution guaranteed, subject to investment risk, including potential principal loss.

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