You have likely, at some point or another, heard about someone who created or was the beneficiary of a trust. You likely have asked yourself at one point or another whether or not it was necessary for you to create a trust. Below is a broad summary of living trusts and some of the reasons for having them.
What is it? A trust is a vehicle that can own your personal assets during your life and make specific distributions after your death. Assets like checking accounts, investments, businesses, real estate, cars, jewelry, and more can be assigned to your trust. You can also make the trust the beneficiary of retirement accounts, life insurance, and more.
Types of Trusts – There are two broad categories with several iterations for each.
Revocable (“Living Trust”) – Can be changed by the person creating the trust or named grantor. This is the most common.
Irrevocable – Cannot be changed under most circumstances during the grantors lifetime. This is less common but is still used under some circumstances.
Pros of a Trust
- Usually makes the process easier for your heirs after you have passed because if properly done, the trustee can begin distributing assets immediately without having to wait for a probate judge. In some cases, probate is almost entirely irrelevant.
- It can make it easier to have more control over the assets after you die. For example you can add restrictions on how the funds are used and when.
- It can offer a greater level of protection since many parts of probate are public record and most trusts are not.
Cons of a Trust
- It can be expensive to set up, usually $1,500 and up for a fairly straight forward financial situation.
- It can be time consuming on the front end to make sure all assets are properly titled to the Trust.
Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized legal advice. We suggest that you discuss your specific situation with an estate attorney. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies may be appropriate for you, consult your financial advisor and other appropriate professionals, such as an estate attorney.