Although death is a difficult subject to discuss, it’s also a part of your financial planning obligations.
You must prepare for the inevitable. Part of planning for the future means having a proper estate plan in place. Doing so minimizes financial difficulties for your family in your absence.
78% of young adults 18-36 and 64% of Generation X—aged 37 to 52—do not have wills. Be it lack of financial affluence or miseducation; both peer groups don’t appear to bother.
When it comes to getting your affairs in order, you need a plan for the future. Find out here what a living trust is, how it works, and why you need one.
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.
There are allowable and disallowable assets appropriate for transfer into a trust. And depending on the asset, the state may require you get a new deed or title issued to the trust’s name.
Some permissible assets include:
- Bank Accounts
- Real Estate
- Cars & Boats
- Stocks and Bonds
For accounts like 401K and retirement, it’s impermissible for the trust to own them. But you can, however, list the trust as beneficiary. The same goes life insurance policies and IRAs.
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
Don’t leave your future up to fate. Be proactive about your financial plans and set up a living trust.
Arrange your affairs the right way so that you and your loved ones benefit in the end.
Request a consult today for more insight into estate planning and asset protection.