The majority of people are familiar with the concept of a will. However, most are not nearly as familiar with a living trust. Living trusts and wills are similar in some ways, but living trusts can do some things that a regular will cannot.
Whether or not a living trust is right for you depends on your specific situation. According to Experian, living trusts can help your heirs avoid probate and potentially help avoid estate taxes.
How can living trusts help me avoid probate?
Unlike with a will, any assets that you placed into a living revocable trust will not go through the probate process. Another advantage of a revocable living trust is that anything you put into the trust remains your property until your death. When you die, your named executor will distribute the assets in the trust as you wish.
You may also change the terms of a revocable living trust at any point before your death. Avoiding probate can help your heirs get your assets far quicker.
How can living trusts help me avoid estate taxes?
In contrast with a revocable living trust, there are also irrevocable trusts. Once you place assets into an irrevocable living trust, you cannot change anything about the trust. Additionally, any assets you place into an irrevocable living trust are now the property of the trust and not your personal property.
The government cannot apply estate taxes to anything in an irrevocable living trust. Additionally, creditors cannot go after assets in an irrevocable trust, either. However, if the law finds out that you placed assets into an irrevocable trust for the purpose of fraud, this may cause you legal difficulties.