The primary reason why one-fifth of American adults choose to have a living trust is to avoid probate. By getting around probate – the full court proceedings governing asset distribution – your heirs will receive your assets much faster. They could receive their inheritances within weeks rather than months or years.
Difference Between Living Trust And A Will
A standard will goes into effect after you die. A living trust, however, begins to work while you are still alive. During your lifetime, you place your assets into a trust for your own benefit, and select someone to be your “successor trustee.” While you are alive, this trust is where your assets exist. Then, upon your passing, the successor trustee will transfer your assets to the beneficiaries in the way that you have specified in the trust.
These living trusts are also called “revocable trusts” or “inter vivos trusts.”.
One big difference, however, is in the amount of privacy a living trust affords you. Unlike a will, a living trust is never made public. Asset distributions happen in private.
Another difference is that you can empower your successor trustee to begin managing your assets while you are alive, in case you become ill or otherwise unable to attend to your business dealings.
And, while a living trust costs more to prepare, as it is a more complex legal document, it can save money in the long run by avoiding probate. A living trust also takes more time at the preparation stage, as you will need separate paperwork to transfer stocks, bonds, and bank accounts into your trust.