A valid will is not enough to ensure the security and timely distribution of your assets in accordance with your wishes when you die. You should consider establishing a living trust in addition to your will.
The larger the value of your estate, the greater the need to create a living trust and ensure the transfer of your significant assets into it while you are still alive.
Read on to find out more about the seven reasons to consider a living trust that will protect your estate and save your heirs time and money.
What Is a Living Trust?
A living trust is a legal, enforceable document that holds property transferred by the Grantor (aka the Trustor, which is the person or persons who created the trust) for the benefit of others (the beneficiaries) and managed by the Trustee.
It is called a “living” trust because it is established while the Grantor (Trustor) is still alive. It can be designated as either revocable or irrevocable. A revocable trust can be revoked or amended by the Grantor, who signs the trust document.
Let’s say you have decided that a living trust is well worth the extra time and expense of setting it up (it is more complex than just making out your last will). You need professional advice in order to get it done right. Learn more here.
The primary purpose of a living trust is to manage your assets during your lifetime and to enable this property to be distributed to your beneficiaries (e.g., surviving spouse or children) easily, without having to go through probate.
What Are the Benefits of a Living Trust?
There are several reasons to have a living trust created, but it is not needed in every case. For a young married couple with few assets and no children, just having a will may be good enough.
But, for situations where assets have been accumulated and you want to ensure timely and orderly distribution to your beneficiaries upon your death, read on.
One of the biggest reasons to have a living trust is to avoid probate. Probate is a legal mechanism by which the decedent’s estate gets settled under the supervision of the court, or judicial authority. Unless there is a living trust set up!
The purpose of probate is to prevent fraud after someone’s death. The court must determine the validity of the will, that all pertinent people have been notified, that all property has been identified and appraised, and that all creditors and taxes have been paid.
Only after all that has been done will the court allow distribution of assets and closing of the estate. Until then, it is a waiting game for the beneficiaries.
Once you die, South Carolina law requires that your will is to be delivered to the Probate Court within thirty (30) days — unless you have a living trust.
The key to avoiding probate is to ensure that the trust is “funded” before you pass away. You must transfer ownership (separate paperwork) of all your significant property, cash, stocks, and bonds to the trust — to be administered by the Trustee.
South Carolina has a “small estate” limit of $25,000. There is simplified probate (called an out-of-court affidavit procedure) available in South Carolina:
- If the value of property passing by will or under the law — except for liens and encumbrances — is $25,000 or less, a probate judge may approve the affidavit
- There is a 30-day waiting period
Decreased Estate Taxes
If you are married, the trust can provide for estate tax savings, especially if it is a joint living trust. Of course, much of the savings depend on the value of your estate at the time of your death.
Also, any costs associated with the probate process are deducted from the estate. So are any court costs associated with contesting a will. Those costs could be avoided if a living trust is legally and properly established and funded.
Greater Privacy for Your Beneficiaries
A will is a public document and all probate proceedings associated with that will become a matter of public record (including listing your assets). A living trust is a private document and distribution of your estate upon your death is private, too.
Protects Your Interests during Your Lifetime
Once your living trust has been created and funded, if you later become incapacitated, the successor trustee you designated will be able to manage the trust assets for your benefit — without any court intervention.
This is a big benefit for people who are single or those who do not have children. The living trust arrangement ensures that you are provided for during your lifetime even if you cannot make decisions for yourself.
This is important, though. As long as it is set up as a revocable living trust, if you dispute the determination of your incapacity, you can revoke the trust and retain control yourself.
Protects Your Minor Children
Minor children are often not responsible enough to manage large sums of money themselves. The trust can be set up to disperse money to children when they get older and more mature, or even to distribute funds staggered over a range of ages.
Protects Your Adult Children
Some adult children may never be able to manage an inheritance on their own, maybe due to a substance abuse problem or just because they are frivolous with money management. The trustee can dispense funds as needed over time.
Keeps Your Assets Out of Unwanted Hands
Say you have a child who is marrying a person you do not care for. What if they were to divorce? You do not want half of your assets winding up with your child’s ex-spouse.
These Are Great Reasons to Consider a Living Trust
At Indigo Family Law, we are experienced at creating living trusts. Our team can help you go through the complexities of getting one in place to benefit you and your heirs.
Now that you know why you should consider a living trust, contact us today and let us help you get all your questions answered.