Living trusts let people transfer property from their own names to the name of the trust. This way if they become incapacitated, or die, someone else will have control over how those assets are distributed without going through probate court proceedings.
What is a Living Trust?
Living trusts also provide privacy after you pass away because accounts in your name aren't listed in public records like a will. Living trusts can also allow you to bequeath your assets more easily than with a will, because the assets are not part of your estate.
What Happens to your Living Trust When You Die?
Living Trusts have been around for decades and provide a way to transfer money directly from your name into the Living Trust without going through probate court proceedings (a process that can take several months). A Living Trust can also sometimes provide privacy after death because accounts in your name aren't listed in public records like a will. Living trusts can also allow you to bequeath your assets more easily than with a will, because the assets are not part of your estate.
Are Living trusts used like wills?
Living trusts can be used as alternatives to wills or they can be used in conjunction with them – providing an element of flexibility. Living trusts also provide privacy after you pass away because accounts in your name aren't listed in public records like a will. Living trusts can also allow you to bequeath your assets more easily than with a will, because the assets are not part of your estate .
What other types of trusts are there?
- Special Needs Trust – A special needs trust (also called a “supplemental needs trust”) is an irrevocable trust that allows the beneficiary to enjoy the use of assets or income held for their benefit, while still allowing them to qualify for needs-based government benefits.
- Irrevocable Life Insurance Trust (ILIT) – An ILIT is an irrevocable trust that is both owner and beneficiary of one or more life insurance policies. If the trust meets certain requirements set by the IRS, then proceeds from the insurance policies may avoid inclusion in a decedent’s gross estate for purposes of calculating estate taxes. In other words, an ILIT can help you avoid the estate tax.
- Qualified Personal Residence Trust (QPRT) – A QPRT is a trust designed to minimize estate taxes by removing assets from your estate. A QPRT trust holds title to your home and allows you to continue living there for a certain period of time; once that period is over, the interest in the home is transferred to the named beneficiaries of the trust, and the house is not included in your gross estate for estate tax purposes.
- Charitable Remainder Trust (CRT) – A CRT is another irrevocable trust that holds income-producing assets. During your lifetime (but for no more than 20 years), you can name yourself (or someone else) as beneficiary — meaning you could receive all the income from the trust. Then, when you die, the assets go to a charitable beneficiary of your choice. This generally allows you to qualify for a partial tax deduction.
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