A Living Trust: What is it and why does it matter?

A trust is a contract that creates a legal entity that holds property for the benefit of its beneficiaries.  When many people think of trusts, they incorrectly believe that trusts are only for the ultrawealthy.  The word “trust” conjures images of bratty “trust fund kids.”  While the ultrawealthy certainly use trusts to manage and protect wealth, trusts are an important form of estate planning for the middle class as well.  Middle class people primarily use a “living trust” to avoid the expense and delay of probate court and to ensure that their wishes are fulfilled in a specific and private way.  If you own a home or have a net worth of over $100,000, you likely should have a living trust.

Creating a living trust is a lot like creating a company.  If a company CEO dies, the company appoints another CEO, and the business of the company carries on without delay.  The same is true of a living trust.  When your assets are in a trust upon your death, a pre-chosen successor, often a family member or close friend, follows the directions contained in the trust to make sure your wishes are followed.  This is done quickly, privately, and inexpensively, and without the need for the formalities, legal notices, and waiting periods that probate court requires. 

It’s called a living trust because you place your assets into the trust while you are still living, and you retain complete control over those assets during your lifetime.  There are no significant changes to your normal life – you still pay your bills, file your taxes, and do everything else just as you would normally.  You can revoke or amend the trust at any time, for any reason or no reason (unless you’ve specifically decided otherwise when you created your trust). 

For people with children, common trust provisions include: (1) children will not receive funds outright until they reach a certain age (often 25, 30, 35, or 40), graduate from college, or achieve some other milestone, (2) children who may be substance-involved will not receive funds unless and until they reach and maintain sobriety, (3) children receive funds separately from a spouse or significant other, and (4) payments for the benefit of children, such as education, medical expenses, or other forms of support may be made without payment to the child directly. 

At Lieberman Siebers & Wood, we are committed not only to creating top-level estate plans at a reasonable cost but also making sure you understand what you’re doing and why it’s important.  Contact us to set up a consultation to have your questions answered and to determine the best strategy for you and your family.