Few would argue that planning for your family's future beyond your own life makes good financial sense. What some don't realize is that provisions like the living trust can do more than ensure a future income. It can also help to ensure your family's emotional security and even physical well being during a difficult life period.
The first 12-24 months after the passing of a loved one are the most difficult. Families are dealing with grief and trying to adjust to life without a significant family member.
Besides the emotional pain that accompanies such an event, new financial stresses also begin to emerge. This is particularly true in cases where the loved one was a key income provider in his or her family. Between the mental stress and the financial and legal matters that must be attended to upon a death, some families find it impossible to cope with the pressure.
The living trust was created to relieve some of the financial and legal stresses that come with a family member's passing. It allows family members to forgo some of the legal issues surrounding the transfer of property. Instead, they are able to more fully concentrate on working through their grief and moving toward healing.
A living trust essentially serves as a replacement for a will. Just like a will, it allows an individual to dictate how his estate should be divided upon his death.
The major difference between it and a traditional will is that a will must be probated. A living trust doesn't need to be probated.
"Probating" refers to the process of having a deceased person's will examined by a legal court. The court is responsible for determining the validity of the will and for interpreting it. The court appoints an executor, whose job is, in part, to help oversee execution of the will.
The process of probating a will generally takes months, at the very least. One year is typical. It's not uncommon, especially in the case of a large estate, for the probating process to take years.
Not only does this delay the execution of the deceased's final wishes, the beneficiaries stand to suffer financially during the process. It may be months or years before they receive their share of the estate.
In the mean time, living and legal expenses mount. Many of these expenses cannot be deferred until the time the inheritance is received.
The living trust was designed to eliminate the probating process. It has five distinct advantages over the traditional will, including:
1) Saving legal and court expenses: It doesn't have to be probated through the court system. It can save the deceased's family thousands of dollars in legal fees.
2) Assets are distributed quickly: It takes just a few weeks to a few months to finalize and distribute the deceased's assets through a living trust. This is a significant contrast to the average of 12 months it takes when using a traditional will.
3) It maintains your family's privacy: Probate records are open to the public. Living trust asset distribution, on the other hand, is not subject to public record. Many people appreciate the veil of privacy that accompanies this instrument.
4) A home can be transferred to the living trust: The same is not the case for those using a traditional will.
5) Saving on estate taxes: A living trust can save your family thousands to tens of thousands of dollars in estate taxes, depending on the size of your estate.
A living trust is prepared in much the same way as a will. However, it need not be prepared by an attorney. Instead, it can be prepared by an expert.
It can also be prepared by the individual himself. It need only be legally registered once completed. Different states have different laws regarding this and documents that must accompany it. Be sure to check the laws in your own state.
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