What Really Is A Living Trust and Why Do I Need One?
At some point in life, everyone has to face that they may be incapable of taking care of their own affairs. In comes the living trust. Of course, there are pros and cons of having a living trust. When thinking seriously about getting a living trust, consult an estate lawyer.
The idea of a living trust is rather simple: have a trusted person in charge of your assets on your behalf. The trust can either be revocable or irrevocable meaning it can be undone or not undone. Revocable trusts are used to avoid probate while irrevocable trusts can help protect assets and provide tax benefits.
The trustee will be responsible for administering any assets that the trust owns. When creating a living trust, one must prepare new deeds. Only those assets which are properly transferred to the trustee can be managed through the living trust. If one becomes incapacitated the trust allows a successor trustee to manage your affairs until you are no longer incapacitated. Certain assets, can’t wait to be managed for long. Any delay can cause irreversible financial loss. Therefore it is very important to act fast!
Power of Attorney
It is best to have both a power of attorney and a living trust, as certain assets may not be funded into the trust and will require a power of attorney or guardianship proceeding. The advantage of a trust over a power of attorney is that since you are transferring ownership of the assets to the trust directly, the institution will not require the typical verification, unlike what an agent under a power of attorney will have to provide.
With a properly funded trust, you are not at the mercy of each individual institution’s legal department. However, both a trust and a power of attorney are preferable to guardianship proceedings which take months and thousands of dollars in legal fees.