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Home » What Does a Living Trust Do for You?

What Does a Living Trust Do for You?

March 27, 2019Living Trusts

living trust

Whether you are creating your very first estate plan, or updating one for the fifth time, there is a good chance that the option to incorporate a living trust into your plan will come up. As with all decisions relating to your estate plan, you should consult with your estate planning attorney before deciding to include a living trust in your plan. In the meantime, however, you may find it helpful to learn more about what a living trust can do for you.

What Is a Living Trust?

A living trust is one of two broad categories into which trusts are divided, with the other category being testamentary trusts. The primary difference between the two is that a living trust activates during the lifetime of the Settlor, or creator, and a testamentary trust activates at the time of the Settlor’s death through a provision in the Settlor’s Last Will and Testament. Fundamentally, however, both categories of trust are the same in that any type of trust creates a fiduciary legal arrangement that allows a third party, referred to as a Trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.  Living trusts can be further sub-divided into revocable and irrevocable living trusts. If the trust is a revocable living trust, as the name implies, the Settlor may modify or terminate the trust at any time. An irrevocable living trust, however, cannot be modified or revoked by the Settlor at any time nor for any reason.

How Can a Living Trust Help You Accomplish Estate Planning Goals?

Of course, in order to decide whether or not to include a living trust in your overall estate plan, you need to know how one might be able to help you achieve your various estate planning goals. A living trust can actually help with a wide variety of estate planning goals and objectives, including:

  • Probate avoidance. This is one of the most common reasons people create a living trust because avoiding probate is a universally desirable estate planning goal. Probate is costly, both in terms of the time it takes and the money that is often spent probating an estate. Assets held in a trust, however, bypass probate entirely.  Consequently, assets held in a living trust can be distributed to your loved ones as soon after your death as you designate in the trust terms. This allows your intended beneficiaries access to much-needed assets immediately instead of having to wait for the conclusion of the probate process which can take months, even years, to finish. It also ensures that the assets you left behind aren’t diminished by the expenses of probate.
  • Gifting to children or grandchildren — using a living trust to hold assets intended for your minor children and/or grandchildren allows you to appoint someone of your choosing as the Trustee of the trust. The Trustee is responsible for protecting and managing the trust assets for the duration of the trust. By contrast, assets left to your children and/or grandchildren in your Will would also need someone to manage them until they reach the age of majority; however, you would have no say in who that person is. Furthermore, as the Settlor of the trust, you are able to create trust terms that direct a staggered distribution of trust funds instead of a lump sum when the beneficiaries reach the age of majority and are able to inherit directly. Staggering an inheritance is usually wise when a beneficiary is relatively young and inexperienced with money.
  • Controlling how assets are used — once a gift is made in a Will it becomes the sole property of the beneficiary to do with as he/she pleases. That leaves the possibility of assets being squandered by a spendthrift beneficiary. A living trust, however, offers you the ability to use the trust terms to retain a certain degree of control over how the assets you gift can be used. For instance, you might decide to include a provision that only allows disbursements for educational expenses or for rent/mortgage payments.

Contact Indianapolis Living Trust Attorneys

For more information, please join us for one of our FREE seminars. If you have specific questions or concerns related to the decision to include a living trust in your estate plan, contact the experienced Indianapolis living trust attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.

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Paul A. Kraft, Estate Planning Attorney
Paul A. Kraft, Estate Planning Attorney
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.

Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
Paul A. Kraft, Estate Planning Attorney
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