A trust is a fiduciary arrangement that allows assets to be held and managed by a third party for the benefit of a beneficiary. A living trust is simply a trust that is created and activated while you are living. The opposite would be a testamentary trust, which does not go into effect until your death. There are many benefits to a living trust, and just about everyone can take advantage of those benefits. If your estate is very large, a living trust may result in reduced estate taxes. There is no Arkansas estate tax, but there is a federal estate tax for estates valued at over $12 million. Even if your estate is nowhere near this large, there are other benefits.
What Are the Benefits of a Living Trust if My Estate is Worth Less Than $12 million?
Living trusts are not just for rich people. There are many benefits for people of more modest means, as well. These include:
- Protecting your children’s inheritance until they are ready to manage it: A living trust can be arranged so that your child does not get a lump sum at a time when they might not be able to manage it. Many trusts are set up to disburse funds over time when the child reaches certain ages. For example, a trust could disburse one-third of your child’s inheritance every 5 years, starting at age 25. Meanwhile, the assets would be under the control of a trustee that you selected. This is only an example; the terms of the trust are entirely up to you.
- Keeping assets in the family: A trust can ensure that your heirs do not transfer their inheritance to others who are outside the family. For example, if your spouse has a fling with a cocktail waitress or a pool boy after your death, they cannot give money or property to that person if it is held in a trust.
- Providing for you while you are alive: It can be especially important for single people without children to have a living trust in order to have a successor trustee who will manage your assets and use them to provide for your care should you become incapacitated.
- Keeping your heirs from squandering their inheritance: if you have heirs who are likely to squander their inheritance due to issues of drug, alcohol, or gambling addiction, for example, a trust can be structured so that they have funds to live on, but do not have access to the full amount of their inheritance.
Should My Living Trust Be Revocable or Irrevocable?
This is a question for one of our experienced estate planning attorneys. Whether your trust should be revocable or irrevocable depends upon your goals for the trust and your specific circumstances. A revocable trust can offer more flexibility, as it can be changed or revoked at any time while you are alive. An irrevocable trust cannot be revoked or changed once it is established, but in some cases, it can provide advantages that a revocable trust cannot.
Do I Need an Attorney To Set up My Living Trust?
Establishing a living trust involves many complicated decisions about what type of trust to establish, what assets to transfer into it, and how to structure what will happen after you pass away. A skilled and knowledgeable estate planning attorney from Dudeck Law Firm can guide you every step of the way.