The major advantages of a living trust are as follows:
1. Protection for your beneficiaries
Possibly the biggest advantage of a living trust is the advantage of protecting the inheritances you leave from creditors, divorcing spouses, and the government (if beneficiaries are receiving government benefits). The trust can be set up to minimize the chances that should one of your beneficiaries get sued, the creditor can seize those assets. Should any of your beneficiaries become divorced, the assets in the trust will not be distributed as part of a divorce. If one of your beneficiaries is receiving government benefits, leaving them an inheritance outright might disqualify them from receiving benefits. A living trust can contain within it a “Special Needs Trust”.
2. Planning for Incapacity
Within the trust you will name successor trustees, who are those persons who will manage your affairs in the event you become incapacitated or simply no longer want to manage your own affairs. The advantage over a durable power of attorney is that many title companies, banks and other institutions are reluctant to accept durable power of attorneys. This is not the case with a living trust. If you don’t have a power of attorney or a living trust, guardianship proceedings must be instituted with the court. Like probate, a guardianship can be a long, lengthy, expensive process. The big advantage to a living trust is that you can tell your successor trustees how you want your money spent in the event you are incapacity. With a guardianship, your guardian can only act in accordance with the limited powers granted to guardians by the law.
3. Effectively Deal With 2nd Marriage Situations
In today’s day and age, second marriage situations are commonplace. People want to provide for their surviving spouses but also want to ensure that their property stays within their family lines and passes to their children and grandchildren. A living trust can easily create a situation where the surviving spouse is cared for financially and at the same time ensuring that the decedent’s property stays in the family lines and is protected for future generations.
4. Remarriage Protection
A common concern of clients is that “I want to provide for my surviving spouse, but on the other hand, what is going to happen should my spouse remarry”. A living trust can be designed in a way that should a spouse remarry or pass away, that the funds don’t pass to the new spouse. Florida has what called “ The Election Share”, which means when one passes away the surviving spouse is entitled to a percentage of the deceased’s estate. The result is often times through no fault of any party, that new spouse receives a part of the spouse’s estate. Proper planning can prevent this occurrence from happening.
5. Probate Avoidance
Probate is the legal process whereby a decedent’s estate is administered. This includes the payment of creditors and distribution of the assets of the estate to the beneficiaries. If all of a person’s probate assets are properly transferred to the trust, then probate will avoided. The probate process can sometimes be lengthy. The costs associated with a trust administration typically tend to be less than those associated with probate. During a probate, notices must be sent out to all interested parties that the probate is taking place, a personal representative will have to be appointed, notice to creditors is provided (whether there are creditors or not) and an inventory and final accounting must be prepared. All of this is done through the court system and nothing is final until the judge signs off. Many times beneficiaries need funds now, and with a living trust, the beneficiaries do not have to wait to use the inherited funds. Time is often of the essence and with a trust; your loved ones can get access to the money, now rather than later.
6. Estate Tax Benefits
This is of most benefit to married couples. All the property you own at the time of your death is counted as part of your estate for estate tax purposes. This includes any money left to loved ones through life insurance, pensions, 401(k) or other retirement accounts. Also, your home counts as well. When you add it up, you could have an estate tax problem. A living trust can be designed to help you save on estate taxes. Furthermore, the tax laws associated with estate tax do frequently change so estate planning is an associated benefit of a living trust.