Understanding The Basics Of Living Trusts
A living trust is a common form of a trust that you can create while you are alive. One of the primary benefits of a living trust is that it allows your beneficiaries to avoid probate, an often lengthy and costly legal process for distributing assets. It can also reduce estate taxes and establish the long-term management of your assets.
At Abrams Probate & Planning Group, I am here to assist you with a wide array of estate-related issues and concerns. Let me put my decades of experience as an attorney to work on your behalf. You can call my Las Vegas office at (702)369-3724 to set up a meeting with me.
Is This Tool Right For You?
Whether a living trust is right for you will depend primarily on how much wealth you have, your age and your health. For example, if you own $5 million in real property, it may make good financial sense to set up a living trust, even if you are decades away from retirement. This is because a trust would protect your beneficiaries from paying a significant amount in attorneys fees and other associated costs if you were to pass away unexpectedly.
If your NET assets are only a couple hundred thousand dollars, and you are middle-aged, it may make more sense to wait. I can advise you on the pros and cons.
How Does It Work?
When you create a living trust, you become the grantor, and you can name whomever you want as the beneficiaries. You can choose to have it protect assets such as artwork, houses, land, cash, stocks and more, and you can set it up to generate an income.
Your trustee is someone you appoint to manage the trust and to oversee the distribution of assets. During your lifetime, your trustee can take control of the trust should you become incapacitated. The trust is also revocable, should you decide it no longer suits your needs.
Tax Considerations
Living trusts do not eliminate or reduce income taxes. This is because you maintain complete control over the assets, and therefore you are still considered the owner of the assets for income tax purposes. You must report the income you earn on these assets on your individual income tax return.
However, you can save money in the long run by using a living trust. It can save your family probate expenses and fees and guardianship expenses and fees. It may also reduce or eliminate federal estate taxes after your death.