As you approach retirement age – and, perhaps, at an even even younger age – you might want to think about investing your assets into living trusts. But what are living trusts? And will they be a good fit for your situation? Let’s take a closer look and find out.
What Are Living Trusts?
When people die, they usually leave a will with instructions for how their money and assets should be split up – amongst their children, for example. The problem is that it can be a lengthy process, and not ideal for privacy. An alternative is to set up a living trust. Living trusts are very similar to a will, except they give you a little more control over where your money ends up.
How Do They Work?
If you set a living trust, you will become the trustee, and will be free to manage your assets as you want to. You can change the beneficiaries as time moves on, and also reassign co-trustees. And, also, the point in time that it gets assigned to the beneficiary.
Why Is Timing Important?
Inheritance from wills cannot be signed over to the beneficiary until they are eighteen years old. Until then, the assets will be managed by a nominated trustee. However, if there is a large amount of money involved, the benefactor may want to have a bit more control over the timing of when their child gets that money. For example, they could get a portion of the money at eighteen to help them through college. And later in their life they could receive more to buy a home and start a family.
What Services Do I Need?
Unless you are au fait with the law and complex financial matters, it is likely you will need to make use of a lawyer, financial advisor and an accountant. However, if you feel confident that you know how the land lies, you can do it yourself with living trust software. Make sure you aware of all the issues you could run into first, however. You could cut legal and financial costs by getting advice first, and then applying what you learn to set up your trust.
So Should I Go For A Living Trust?
It all depends on the value of your entire estate. The more you have to leave for your beneficiaries, the more tangled the legal process will be during probate. However, if you have less than around $20,000 to leave, a normal will should suffice. Living trusts are also more expensive to set up – but the cost of probate can exceed that if you have a healthy set of assets.
Living trusts are slightly more complex to set up than wills, but the results are far simpler. This is especially true if you have a lot of assets that will be spread around a number of people. However, if you are looking for more control over your assets and how they are distributed, then a living trust is a good option, however much you own in assets.