What Is a Probate Sale? What Is a Living Trust?

What Is a Living Trust?

A living trust is a type of document that a person creates to designate an individual to manage their assets. This person is called the trustee. Often, the person who makes the document will be the trustee while they are alive, and they will designate another trustee to manage the assets upon their death or incapacitation. With a living trust, you avoid your assets going to probate and it makes the inheritance and distribution processes easier.

What Is an Irrevocable Trust?

An irrevocable trust cannot be changed without the agreement of all the parties involved, and the settlor cannot be their own trustee. This type of trust reduces the taxable estate.

What Is a Revocable Trust?

With a revocable trust, the person making the trust can designate themselves as the trustee and control the assets, and make changes to the trust. However, this person might also be liable for estate taxes depending on the value of the estate.

What Happens Without a Trust or Will

Without a living trust, what happens to your assets depends on if you have another document in place, like a will, or if you do not have any estate planning completed. If you have a will, you have designated which assets will go to which people. However, your properties still have to go through the probate process, which can take up to a year!

Without any sort of estate planning documentation in place, your assets will be distributed according to state law. Often, the first person who has the rights to your assets is a surviving spouse. If you do not have a surviving spouse, it will go to your closest blood relative, like a parent, child, or sibling. However, there is some fine print when it comes to the definition of a spouse.

Married Couples

Married couples are protected under state law when it comes to the distribution of assets after one of the spouses passes away. In most states, the spouse will inherit all of the assets unless otherwise specified in a will or trust.

Unmarried Couples

Unmarried couples, however, are not protected under state law. Sometimes, even a domestic partnership might not be covered under inheritance law. If you are in a common law marriage, long term relationship, or a domestic partnership, consider estate planning with a trust or will to make sure your assets go to your partner.

Conclusion

A living trust is an arrangement in which a third party can make decisions about the possessions of another person. Usually, when people set up a living trust while they are alive, they are the trustee. They then choose a trustee to inherit the trust once they are incapacitated or have passed away.