This article is intended for educational purposes only and is not legal advice. For guidance on your personal situation, please contact a lawyer.
A goal many people have is to be able to pass on an inheritance to their loved ones when they're no longer around. It's a way to leave a lasting effect beyond your lifetime. The good news is that there are a few ways to pass on an inheritance. However, not every route is right for everyone.
I used to think a will was the best way to pass on an inheritance, mostly because it's the most common and seemed relatively straightforward. That said, a living trust is also a good option for many people.
A living trust is a legal arrangement that allows you (the grantor) to put assets into a trust and dictate exactly how you want them distributed after you pass away. After becoming familiar with a living trust, I believe that's the best way. Let's take a look at why.
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You can avoid the probate process
A will must go through the probate process, which is a legal process where a court determines its validity and then oversees the distributions of the assets listed in the will.
For some people, this oversight is preferred because it helps with transparency and fairness, helping to prevent other problems. Unfortunately, the probate process can often be a hassle. It's expensive and can be lengthy (months or years, depending on your court's laws). If your beneficiary needs access to the assets or funds immediately, the probate process could delay delivery.
By using a living trust, you can avoid the probate process altogether and generally skip getting courts involved.
Living trusts have more privacy than wills
When a will goes through probate, it becomes part of the public record. Anyone interested could get information about the assets that were inherited and their value, who inherited them, and other personal details. This isn't possible with a living trust. Details about a living trust, such as its beneficiaries, assets, and terms, don't generally become part of the public record.
On a simple level, this is good for those who prefer to keep their business private. On a deeper level, this privacy can help avoid potential conflicts between recipients and non-recipients (who may feel like they should've been recipients). There have been plenty of cases where families or close associates have become estranged because of how assets were or weren't divided.
The privacy of a living trust can also protect people against financial predators. With the public having access to information in a will, receiving a large lump sum of money or assets can make beneficiaries prime targets for fraud, scams, or exploitation.
Living trusts allow for a lot of flexibility
Living trusts are sometimes referred to as revocable trusts because they can be modified or revoked entirely while the grantor (whoever created the trust) is alive.
If there's one thing to know about life, it's that it can be unpredictable, and unforeseen events can happen. People get married, divorced, have children, lose children, and have their financial situation change drastically. In any of these or similar events, it's nice to have the option to adjust your living trust accordingly to ensure it still aligns with your current situation and wishes.
For minor changes, like adding or removing small assets, a simple amendment could do the trick. For more significant changes, like changing the distribution process, the entire trust may need to be redone. Redoing a trust isn't a hard process, but you should consider consulting with a professional to make sure the changes are executed properly.
As I'm sure you can guess, that would involve more expenses. That might not be ideal, but it's much better than the alternative of getting it wrong and complicating the process when distribution time comes.
