A living trust is an agreement where the trustee – either a person or a financial institution – holds the legal possession of a fund or assets that belong to another person, the beneficiary, and it is created while the person is alive.
A living trust delivers three key benefits:
Uninterrupted Financial Protection – A living trust agreement can instruct the trustee to perform a wide variety of special tasks when the need arises. These tasks might be as simple as paying a world traveler’s quarterly estimated taxes while he or she is out of the country or as complex as handling all household financial matters for a customer who has suffered a stroke and needs a housekeeper and nursing home care. With proper planning, living trusts can do much to avoid the financial management problems that arise during a prolonged period of incapacity—problems that might otherwise have to be dealt with by a court-appointed conservator.
Avoiding Probate – Assets placed in a living trust avoid probate because these assets are removed from the “probate estate”—the estate controlled by a will. Trust assets are distributed to beneficiaries or held in continuing trust, as directed in the trust agreement. Thus, using a living trust as the core of an estate plan may lead to reduced settlement costs. More importantly, delays are avoided. For example, a married person’s living trust can simply keep operating, uninterrupted by estate-settlement procedures, for the benefit of the surviving spouse.
Protects Privacy – Living trusts also help to keep estate plans private. Unlike probated wills, provisions for the distribution of assets contained in living trust agreements do not normally go on public record. The confidentiality of trust-based estate plans has made them attractive to both public and private figures.