Although death is a difficult subject to discuss, it’s also part of your financial planning obligations. You must prepare for the inevitable. Planning for the future includes having a proper estate plan in place, which minimizes financial difficulties for your family in your absence.
78% of young adults (ages 18-36) and 64% of Generation X (ages 37-52) do not have wills. This can be attributed to various factors, including a lack of financial resources or miseducation.
If you’re considering establishing a living trust, consulting with an experienced attorney is highly recommended. At New York Legacy Lawyers, our team of experienced Brooklyn trust planning lawyers can provide valuable guidance throughout the process, ensuring that your trust is properly structured. Contact us today at (718) 713-8080 to discuss how we can help you establish a solid living trust that reflects your wishes and protects your estate.
To get your affairs in order, you need a solid plan for the future. Understanding what a living trust is, how it works, and why you need one is crucial.
What Is a Living Trust and How It Works
A living trust is a legal document created prior to death. This trust acts as an arrangement between you and a trustee.
In your passing, the trustee maintains possession of your property and assets. These assets flow into the trust. The trust goes into effect while you’re alive and maintains its effectiveness in your death.
You may add a provision to stop the trust on a specific date. Until specified, the trustee continues to manage the trust on behalf of you and your named beneficiaries.
There are several types of trusts. Discussed most often are the revocable and irrevocable trusts.
Revocable Living Trusts are the most flexible of the two. With this option, you’re allowed to move assets in and out of the trust as you please. You also have the recourse to revoke the trust at any time.
The Irrevocable Living Trust operates on more permanent motives. Once assets get placed in the trust, you cannot move or take them out again.
Each state has specific rules and regulations on trusts. So be sure to educate yourself on the guidelines before you set one up.
Types of Living Trust | Details |
---|---|
Revocable Living Trust | Assets can be freely moved in and out of the trust. Can be revoked at any time. Offers control, privacy, and helps in avoiding probate. Allows for flexibility in managing assets during your lifetime. |
Irrevocable Living Trust | Assets cannot be moved or revoked once placed in the trust. Offers enhanced asset protection, tax implications, and helps in avoiding probate. Provides a more permanent and secure structure for asset management. |
Allowable Assets
There are allowable and disallowable assets appropriate for transfer into a trust. And depending on the asset, the state may require you to get a new deed or title issued to the trust’s name.
Some permissible assets include:
- Bank Accounts
- Real Estate
- Jewelry
- Cars & Boats
- Securities
- Stocks and Bonds
- Artwork
- Heirlooms
For accounts like 401K and retirement, it’s impermissible for the trust to own them. But you can, however, list the trust as a beneficiary. The same goes for life insurance policies and IRAs.
What Does a Living Trust Do?
A living trust is a crucial estate planning tool that allows you to manage your assets during your lifetime and ensure a smooth transition of your estate after you pass. The trust is a legally binding arrangement between you (the grantor) and a trustee, who takes responsibility for managing your assets held in trust.
This arrangement doesn’t end with your death. Instead, the trust assets, which can include bank accounts, real estate, jewelry, cars, and securities among other things, are seamlessly transferred to your named beneficiaries under the trustee’s management. It’s important to understand that not all assets, like 401K and retirement accounts, are permissible for transfer into a trust.
Living trusts can be categorized mainly as revocable and irrevocable. A revocable trust offers flexibility, allowing you to move assets in and out of the trust freely and even dissolve it if you wish. Conversely, an irrevocable trust is more rigid. Once assets are placed into this trust, they cannot be removed or altered without the consent of the named beneficiaries.
A living trust allows you to maintain control over your assets during your lifetime and ensure a well-organized transition of your estate, reducing potential conflicts among beneficiaries and circumventing the often lengthy and costly probate process.
Do You Need a Power of Attorney If You Have a Living Trust?
A living trust is an effective estate planning tool that helps you manage your assets during your lifetime and provides a plan for their distribution after you pass away. However, having a living trust does not eliminate the need for a power of attorney. A power of attorney is a legal document that designates someone to make financial and legal decisions for you if you become incapacitated.
While a living trust helps avoid probate and can streamline the transfer of assets, it does not cover all aspects of decision-making. For instance, a living trust only deals with the assets titled in the trust’s name. If you need someone to handle your financial matters or sign documents for you while you are still alive but unable to do so, a power of attorney is necessary.
Moreover, a power of attorney can be crucial in situations where you may be temporarily incapacitated or need assistance with health care decisions. It complements the living trust by ensuring that a trusted person can manage your affairs without needing court intervention. Therefore, even if you have a living trust, setting up a power of attorney is a crucial part of your estate plan. It provides an additional layer of protection and ensures that your wishes are respected when you are unable to act on your own.
Why You Should Consider a Trust
There’s no rule of thumb about who should and shouldn’t have a living trust. You should always take stock and inventory of what you have.
And if you have dependents, decide if you’d like to leave them in a better financial situation.
You can work with an estate planning attorney to help you figure out the best way to manage your assets in life, and death.
Set Up an Estate Plan
Understanding the nuances of a living trust can be pivotal in securing the future of your assets and ensuring they are managed according to your wishes. A living trust not only provides a flexible and private way to handle your estate but also helps in avoiding probate, which can be a lengthy and costly process. Considering the benefits and potential complexities, it’s crucial to determine whether a living trust aligns with your personal and financial goals.
At New York Legacy Lawyers, our Brooklyn trust planning attorneys are dedicated to guiding you through the intricacies of estate planning. We can help you assess your unique situation and decide if a living trust is the right choice for you. Our experience ensures that your trust is tailored to meet your specific needs, providing peace of mind for you and your loved ones. Contact us today at (718) 713-8080 to schedule a consultation and take the first step towards securing your legacy.