A living trust is simply a three-way fiduciary contract in which the initial party, the trustee or custodian, transfers a real estate property to the beneficiary for the beneficiary's benefit. In plain English, you are giving a trustee, the authority to make investments in your name and have them receive a certain amount upon the end of your life. This then becomes a debt to your beneficiaries. The purpose is to ensure that your debts are paid after you die, so they can bequeath your estate as part of your final will. However, there are times when it is not necessarily a good idea for your beneficiaries to make these investments.
When this occurs, a living trust may need to be modified in order for the beneficiaries to agree. If modifications are not made, there are two main issues that can arise. One issue that can come up is that the initial trustee doesn't have enough money to continue the trust. In this case, one of two things can happen.
First, if the original beneficiary is no longer able to pay the estate taxes, then the estate needs to go through probate. Probate is when the court makes a decision about how the assets will be distributed out. The reason that this is so important is that during probate, it is more difficult for your beneficiaries to get their inheritances. Another issue arises if the original trustee neglected to mention any type of disclaimer on the original documents. This can open the door for other heirs to continue the probate process without any additional agreement from the beneficiaries. It is very important to note that when this happens, the living trust has to be modified so that the probate can continue, thus, preventing any type of claims by other heirs. Learn more about living trusts here: clfusa.com.
Another reason why living trusts are so important is because they allow for faster asset transfer than some forms of estate planning. With testamentary trusts and revocable living trusts, there is usually a very long waiting period between when the grantor dies and when the assets are transferred. By using living trusts, this time is cut down dramatically. For guidance in getting the right living trust az, click here for more info.
Using your life insurance through your trust also has other benefits. By carrying your life insurance through your trust, you are not actually taking out a policy to cover the funeral expenses. This means that you don't need to change your existing policy at all, which can save quite a bit of money. Using living trusts for your estate planning also provides a much safer way to accomplish your goals than doing things like wills or other forms of estate planning. As already mentioned, this process is less formal than traditional wills and other methods, but it is a simple enough to follow that almost anyone can do it.
There are other ways to accomplish your goals with a living trust, as well. You can name multiple beneficiaries and have one beneficiary live beyond death, using an irrevocable living trust. You can name someone the executor for your death (put another line for that in the living trust), so that your estate will be completely protected in the event of your death. You can also make sure that your debts and liabilities won't prevent you from being able to reach your children or loved ones if you become incapacitated or pass away, while making sure that those debts and liabilities won't preventing your beneficiaries from reaching their own goals. Changing your estate plan to include a revocable living trust can help you reach all of these goals and more. Check out this related post to get more enlightened on the topic: https://en.wikipedia.org/wiki/Trust_law.