More than 70 percent of Black Americans don’t have a will, according to Caring.com’s 2021 wills and estate planning survey. Estate planning is vital to not only prepare for your own passing but to leave a defined financial legacy. A will, however, is not the only tool for estate planning.
One option is a living trust.
A living trust is a legal document established by an individual (called a grantor or trustor in a living will document) while they are alive to protect their assets and direct their distribution after the grantor’s death.
A living trust document lays out the terms of the trust and the assets that the grantor assigns to it. A trustee is designated by the author of the trust as the person (or entity) who, at a certain point, will control those assets for the benefit of the beneficiaries.
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Living trusts can be either revocable or irrevocable. And as assets grow or diminish, living trusts should be reviewed every few years in case changes are needed.
Revocable living trusts are often used to protect the assets of the grantor should they become ill or otherwise unable to control them. With an irrevocable living trust, the trust itself owns the assets and the grantor can’t designate themself as the trustee. Thus, the grantor relinquishes certain rights of control over the trust. While you still pay taxes related to the assets in a (revocable) living trust, the tax rate doesn’t increase.
Wills and living trust differ in various ways. A will does not go into effect until a person has died. A living trust, on the other hand, takes effect while the grantor is living. The trust does not have to go through probate for assets to reach the heirs when the grantor dies or becomes incapacitated, Investopedia reported.
A living trust can cover all of the grantor’s assets–from real estate (land, commercial property, homes) to financial accounts to personal property (such as jewelry, artwork, antiques) to business interests.
There are some disadvantages to a living trust. For one, a grantor loses ownership of, and control over, assets placed in an irrevocable living trust.
When creating a will or a trust, it is advisable to consult tax, investment, and legal advisors.
Photo by olia danilevich: https://www.pexels.com/photo/a-man-writing-on-white-paper-using-a-black-pen-5313169/