A living trust is also known as a revocable living trust or a revocable trust. It is a legal document that establishes a trust for assets you wish to transfer into it. The main function of a living trust is to oversee the transfer of your assets after your death. Under the conditions of the living trust, you are the grantor of the trust, and the person you designate to distribute the trust’s assets after your death is known as the successor trustee.
A living trust allows you to bypass the courts. A will must go through probate, which is the thorough but lengthy and painstaking legal process used to value your estate, settle any debts, pay taxes and transfer assets to your heirs. Any assets that are registered only in the name of the deceased must go through probate.
A living trust is a legal document created by you (the grantor) during your lifetime. Just like a will, a living trust spells out exactly what your desires are with regard to your assets, your dependents, and your heirs. The big difference is that a will becomes effective only after you die and your will has been entered into probate.
A living trust bypasses the costly and time-consuming process of probate, enabling your successor trustee (who fills basically the same role as an executor of a will) to carry out your instructions as documented in your living trust at your death, and also if you’re unable to manage your financial, healthcare, and legal affairs due to incapacity.
Some of the different assets you can transfer to a living trust include real estate, cars, boats, bank accounts, antiques, jewelry, artwork, family heirlooms, stamp or coin collections, stocks, bonds, mutual funds and other securities. Depending on the type of asset you’re transferring, you may have to get a new deed or title issued in the trust’s name.
Certain types of assets can’t be owned by a trust but you can still name the trust itself as the beneficiary. For example, you can name the trust as a beneficiary for a retirement account or for your life insurance policy. When you die, your benefits are automatically paid into the trust.