Last week, we discussed living trust mills and how they can wreck havoc on an elderly person's finances. It is important to understand what trusts are and how to use them effectively to keep yourself protected. One type of trust that you should know about is the living trust.
A living trust is a trust in which the person creating the trust can act as the trustee while he or she is still alive. This type of trust can be revoked at any time, so it is sometimes called a revocable trust. A living trust is one option that people have so they can avoid the probate process. The items in the trust are put into the ownership of the trust. When the trust is handed to the beneficiary in accordance with the terms of the trust, the trust is dissolved.
While living trusts aren't too complicated in most cases, anyone who is considering one should make sure that he or she understands how to set the trust up. Writing up the terms of the trust and making sure all the information is covered in the trust is vital. The trust also has to be filed and the property has to be transferred over into the trust.
There are sometimes issues that arise when creating a living trust. While this is a good tool to help your loved ones avoid probate down the road, you should think about how the terms of the trust will affect your loved ones. From tax implications to other costs that might occur, you should understand how every word can affect your estate.
Source: FindLaw, "Living Trust Information" accessed Jan. 23, 2015