What Is a Living Trust and When Should You Consider One?

What Is a Living Trust and When Should You Consider One?

March 15, 2022

Establishing a living trust helps increase financial security for times when you and your family are most vulnerable—after all, things happen, including death and unfavorable medical diagnoses.

What Is a Living Trust?

A living trust is a wealth management planning tool and legal document used to transfer assets to beneficiaries, and avoid the probate process. The terms “living trust,” “revocable trust” and “revocable living trust” are interchangeable.

Revocable vs. Irrevocable Trust

A revocable living trust’s key features include the grantor retaining control of assets and ability to make changes. Whereas, with an irrevocable trust, the grantor gives up control of the assets and may not modify or revoke the trust without beneficiaries’ approvals.

Also, a revocable living trust does not protect assets from creditors, whereas an irrevocable trust does, since the trust owns the assets.

Keep in mind, when a living trust grantor dies, the trust automatically becomes an irrevocable trust, since the decedent is no longer alive to make changes.


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When Should You Consider a Living Trust?

You should consider a living trust when your goals include expediting estate distributions to beneficiaries upon your death and providing instructions to a successor trustee for managing your finances in the event of a chronic illness or disability.

Alternatively, most financial accounts and life insurance policies require named beneficiaries, enabling direct distributions without the need for a trust.

Living Trust vs. Will

A key distinction between a living trust and a will is life and death—literally. Specifically, a living trust is valid while the grantor is alive. Whereas, a will becomes effective upon the testator’s death.

Also, choosing the executor of your estate is necessary for both a living trust and a will. And while much of your estate can be included in a living trust, it’s important to also have a will.

Here are two key reasons why you need a will:

1) Minor Children: If you have young children, legal guardianship is named in a will, not a trust. What’s more, if you don’t name a guardian for your children, a probate court will decide for you.

2) Other Property: After establishing your trust, you may forget to retitle future assets, like a new boat.

What is a living trust?

How To Fund a Living Trust

To fund a living trust, either retitle assets in the trust’s name (with real estate, for example) or assign your trust as a primary beneficiary (e.g., a non-qualified annuity).

Next Steps

Creating a living trust is a key step to build financial security for your family and ensure your estate wishes are fulfilled in the event of your death. Simultaneously, your assets bypass probate and are readily accessible, easing your family’s burden at a challenging time. Contact Adviser Investments anytime for assistance. We pride ourselves on being The Planner You Can Talk To.


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Tax and legal information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice.  Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice. Always consult a licensed attorney or tax professional regarding your specific legal or tax situation.

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