Understanding Living Trusts: Your Questions Answered

With Living Trusts becoming a hot topic on social media, I’ve been asked several times recently about the benefits and if they’re a suitable option for Estate Planning.

Let’s take a look at why Living Trusts might be beneficial for you and address the two most commonly asked questions that might also be on your mind.

Can Creating a Living Trust Save Costs Compared to Going Through Probate?

Absolutely. One significant advantage of establishing a Living Trust is that it helps your assets avoid probate—the legal process of validating a will and distributing assets after someone's death. By placing your assets in a Living Trust, you can specify how they should be distributed upon your death, bypassing the need for probate. This not only saves time and reduces costs but also ensures privacy for your estate.

Can I Use a Living Trust to Keep My Will and Asset Details Private?

Yes, a Living Trust offers enhanced privacy and control over your assets. Unlike a Will, which becomes a public record during probate, a Living Trust allows for the discreet distribution of assets without public scrutiny. Furthermore, a Trust can be tailored to meet specific family needs and dynamics, providing peace of mind that your wishes are executed exactly as intended.

Here are a few scenarios where Living Trusts have made a significant difference:

Privacy and Probate Avoidance: Sarah, a retiree, uses a Living Trust to manage her sizable estate across multiple provinces privately and without the delays and costs of probate, ensuring swift and private asset distribution to her beneficiaries.

Blended Family Situations: Michael establishes a Living Trust to provide for his current wife with the income from his estate while preserving the principal for his children from a previous marriage, ensuring his assets are distributed according to his specific wishes without family conflicts.

Managing Incapacity: Linda, a career woman with challenging health issues, sets up a Living Trust with a trusted friend as the successor trustee to manage her affairs seamlessly without court intervention if she becomes incapacitated, ensuring her finances are handled as she intended.

There are two kinds of Living Trusts: Revocable and Irrevocable

Revocable: This is the most common type. The person who creates it maintains control over the assets placed within the trust. They can change trust rules, beneficiaries, or assets.

Irrevocable: With an irrevocable Living Trust, the trust itself owns the assets and trust provisions can only be changed in certain, specific situations. Such changes may even require the approval of the courts.

The types of assets that go into the Trust are stocks/bonds, mutual funds, money markets, bank accounts, cash and life insurance policies or annuities. Living Trusts cannot name an executor for a will or name guardians for minor children so a Will would still be needed, in addition to a Living Trust.

Next Steps

Establishing a Living Trust can offer numerous benefits, from ensuring privacy and speeding up the distribution of your assets to protecting your legacy and providing peace of mind. It’s important to discuss this with a legal expert, like your lawyer, to tailor a trust that can best serve your individual needs and circumstances.

For a more detailed guide on creating a Living Trust and understanding its benefits, click here to read our full article.

If you have any questions or want to discuss how a Living Trust might fit into your broader financial strategy before meeting with your lawyer, please feel free to reach out.