Should You Create a Living Trust?

When you pass on, how do you want your assets to be handled and distributed to your loved ones or charitable organizations? Today’s post explores the ins-and-outs of creating a living trust. We’ll explore the differences between trusts and wills, the responsibilities of executors and/or successor trustees, and take a look at the financial ramifications for creating such a legal document.

Living Trusts vs Wills
Let’s start by exploring the difference between creating a living trust and a will. Both are legal documents designed to ease the transfer of assets after an owner’s passing. Both documents help speed up the allocation of property such as housing, land ownership, and personal property items to beneficiaries.

The differences between the two come in the form of how the documents are set up. A will is a legal document designed to allocate an executor to execute the ‘will’ of the owner after death. It’s subject to a probate period where the courts must prove the will is indeed valid and accurate before such dispersions can take place. The probate period can often times be lengthy and expensive for family members of the deceased.

Living Trusts are legal documents created while the party is still alive. Assets are placed within the trust for the owner’s benefit and use during his or her lifetime. The trust is transferred to designated beneficiaries through a chosen ‘successor trustee’ either during the owner’s lifetime or after death. Unlike a will, a living trust avoids the probate process, speeding up the distribution of assets significantly.

Consider the Costs
Living Trusts may be more expensive than wills because they are a more complex and complete legal document. While more expensive upfront, using a living trust will mean the owner’s estate will most likely end up paying less than if a will was issued because of the avoidance of court probate sessions.

Once a general plan or “roadmap” is created for the trust, then the trust must be funded. This means assets such as 401(k)’s, Roth IRA’s, bank accounts, bonds, etc. are allocated into the trust. It’s best to work with both your financial advisor and an estate planning attorney when moving these assets around to ensure the best financial plan is made for your specific situation. Idaho Medical Association Financial Services advisors specialize in the handling and advising of wills and living trusts.

It’s important to note that we advise every family to at least have a will, and to consider investing in a trust once one’s assets increase. These legal documents protect families during crisis. For young families, it’s especially important to create a will as a way to designate guardianship of children as well.

Other Benefits
Living trusts have a few other notable benefits to consider: firstly, whereas will’s are subject to public record, living trusts are not; and therefore, offer privacy and anonymity. These benefits may be huge considering the case of well-known public figures, celebrities, and/or any peoples preferring financial matters to be kept away from the public eye.

When creating a will, unless a power of attorney is also granted to an executor, all actions must wait until the said party has passed on to be undertaken. For example, if an elderly person suffers from illness, the executor may not execute the will until the person has passed on (unless a separate power of attorney is created).

With a living trust, the ‘successor trustee’ may begin executing the trust plan if the owner falls ill and can no longer execute the plan themselves. There’s also a clause in the living trust allowing for the successor trustee to be easily revoked and power returned to the owner should mishandling (or concern of mishandling) occur.

Concluding Thoughts

The general rule of thumb to follow for creating a living trust is as follows: the more assets and larger the portfolio, the more advised it is to create a living trust. For smaller and less substantial accounts, a will should be sufficient.

For more information on creating a living trust, be sure to contact your financial advisor for a specific review of your financial situation and portfolio, call (208) 336-9066 or email jared@imafs.org. We look forward to continuing to assist you on your financial journey.

Idaho Medical Association Financial Services is a financial and wealth management firm specializing in personalized financial guidance to accredited investors in the medical field. Areas of speciality range from investment planning and retirement analysis to in-depth services such as tax analysis and strategies, insurance and estate planning and financial planning. For a free financial consultation, please call: (208) 336-9066 or email jared@imafs.org.