A living trust is the same as a revocable trust, a revocable living trust, and an inter vivos trust.
Think of a trust as a third-party beneficiary contract where you have a trustmaker, grantor, settlor, or settlors who form a trust, basically as an agreement with a trustee party to provide for beneficiaries.
Often when a living trust is formed, the people in its dependence are the beneficiaries. An individual creator of a trust or his/her spouse is frequently the trustee, to provide for themselves and any other beneficiaries.
Because a living trust can be revoked or amended at any time, and property can be added to or removed from the trust at any time, a living trust uses the Social Security Number, for tax-reporting purposes, of the primary trust-maker.
When death occurs, or even in disability, that continues, and often provides for the disability of the trust-maker or trust-makers. When death occurs, the living trust becomes an irrevocable trust; its living nature, its ability to be amended or revoked, or to have property added or removed, will end.
Property can be added to the trust, if the trustee accepts it, after death. Usually that happens by property being poured into (decanted) the trust via the trust being the beneficiary of an insurance policy or funds from a retirement plan in which that plan pays into the successor of the living trust, as the trustee beneficiary requests from the retirement plan.
Trust Helps To Avoid Probate
Many reasons exist to form a living trust. One of the primary selling points for forming a living trust is that at death you can avoid the legal process of probate, as long as your assets are governed by beneficiary designations and/or are titled in the name of the living trust. Property that is in an individual name will still require a probate to be put into the living trust.
But there are many other reasons beyond avoiding probate for having a Living trust. Avoiding probate has been sold and promoted as the primary reason to have a living trust, but many people have a trust because it provides specific instructions for the way they want to be cared for in disability.
A trust can also provide immediate asset protection to beneficiaries, in the event of your death. A will is only effective at death and powers of attorney appoint people who are going to be in charge of paying bills and handling business or healthcare matters for you, but they don’t provide instructions for how you want to be cared for.
Trusts Advantageous For Singles
The additional ability to document your desires for situations while you are still alive is a big advantage of living trusts, especially for single people. For someone that doesn’t have spouse that would know, or whose family is spread around, a living trust is extremely helpful to provide for how a single person wants to be cared for and who’s going to provide that care.
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