Whether your estate is large or small, you want to make sure it is well protected and your assets are managed according to your wishes, during your lifetime and beyond. You can protect your assets and achieve your goals through the use of trusts. There are many types of trusts, including living trusts or testamentary trusts. Both of these legal mechanisms have been used for several hundreds of years, but what are some key distinctions between them?
A living trust is created by a Settlor while he or she is still alive and takes effect as soon as the trust instrument is signed and the trust property is transferred from the Settlor to the trustee(s). After death of the Settlor, a living trust may either continue operating or come to an end, with the trust document providing instructions on how to distribute the trust property to the beneficiaries. On the other hand, a testamentary trust is established in a Will during one’s life and comes into effect only upon the death of the Testator.
For a Will to be legally recognized, it must undergo the probate process to receive the endorsement of the court. A key feature of the probate process is that your Will becomes a part of the public record, and therefore is a public document that is available to anyone who seeks it. However, a living trust will remain confidential and not form a part of the public record since it does not require a public court process. You may therefore reduce or eliminate probate costs and estate administration taxes by instituting a living trust.
The role of a trustee is an extremely important one, involving legal obligations as well as significant management and administrative responsibilities. Trustees are given the power of managing property according to the terms of a trust agreement or Will. Therefore, choosing the right trustee is essential to maintaining security and peace of mind.
There are many different types of trusts, including revocable/irrevocable trusts, spousal trusts, alter ego trusts, insurance trusts, and trusts established especially for individuals with disabilities. Trusts and Wills result in certain tax consequences, so you should confer with a lawyer or tax professional to determine how you can achieve your personal objectives and benefit from financial and tax advantages. At Vakili Law Group, we work with you and your team of accountants and financial advisors to carefully take into consideration these and consequences for you and your beneficiaries. Contact one of the lawyers at Vakili Law Group to learn more.