In pop culture, trusts are portrayed as being for the extremely wealthy. However, you don’t need to be part of the 1% to benefit from this estate planning tool.
At Quraishi Law Firm & Wealth Management, we encourage many of our clients to utilize living trusts as part of a comprehensive estate planning strategy. A living trust is a trust created during the lifetime of the grantor, who is the person establishing the trust. A living trust can also be referred to as an inter vivos trust.
Benefits of Creating a Living Trust
Although both wills and trusts are used to pass your assets and property to your loved ones upon your death, living trusts have four key advantages:
- Avoiding probate. With a trust, your heirs can avoid the time-consuming and costly probate process. With just a will, probate can take several months or even years to complete.
- Protecting your family’s privacy. With a trust, your wishes are completely private. With just a will, the distribution of your assets becomes public record as part of the probate process.
- Planning for possible incapacity. With a trust, you can appoint the person of your choice to manage your affairs if you become unable to do so due to physical or mental incapacity. With just a will, your loved ones will need to petition the court to choose a guardian to handle your affairs.
- Allowing for enhanced control over asset distribution. With a trust, you can specify when and how your heirs receive your assets—allowing you to make distributions at specific age intervals or providing funds to be used solely for college education expenses. The Quraishi Law Firm is one of a few select firms to offer the Personal Asset TrustSM (which allows your beneficiary to control their inheritance, how it is distributed, as well as who may receive it when they pass away. It is a special kind of trust acquired from your living trust document. You’re able to put special protections in place for your money once it gets passed on to your beneficiaries). With just a will, you can only control who receives your assets—leaving your beneficiaries able to spend their inheritances in whatever way they please.
Types of Living Trusts
Living trusts can be revocable or irrevocable. A revocable living trust can be terminated at any time if the grantor’s needs or planning goals change. An irrevocable trust can’t be terminated. (A revocable trust becomes an irrevocable trust when the grantor dies.)
A revocable living trust is a more flexible planning estate planning option and is often used to perform many of the same tasks as a Last Will and Testament. As the grantor, you control the assets in the trust during your lifetime. After your death, the person you’ve named as the successor trustee takes over asset management. If you transfer most of your assets to a revocable living trust during your lifetime, your heirs will be able to avoid the probate process. This approach also preserves the privacy of your personal finances.
An irrevocable living trust is typically created as a tool to reduce or eliminate estate tax burdens because it legally removes your ownership of the assets placed within the trust. In addition to offering tax benefits, this type of trust can also be used to support a favorite charity or provide for a loved one with special needs. In some cases, an irrevocable trust may be recommended as an asset protection tool for attorneys, doctors, or others working in professions that leave them vulnerable to lawsuits. While effective, it is important to consider that creating an irrevocable living trust offers less flexibility to adapt to changing financial or personal needs.
Assets That Can Be Included in a Living Trust
Almost any asset with a monetary value can be included in your living trust. This includes:
- Bank accounts
- Stocks, bonds, and mutual funds
- Small business interests, including stocks in a closely held corporation or partnership interests
- Real estate
- Fine art, antiques, or collectibles
- Intellectual property rights such as patents, copyrights, and trademarks
Although it’s possible to put nearly any asset into a living trust, it’s generally recommended that only your most valuable assets be included in the trust to maximize its effectiveness as an estate planning tool. Our estate planning attorneys can review your assets and help you determine which approach makes the most sense for your unique situation.
Let Us Help You Establish a Living Trust
Quraishi Law Firm & Wealth Management provides a full range of estate planning services, including the formation of revocable or irrevocable living trusts. Our estate planning attorneys are available at our Jonesboro and Little Rock office locations to serve clients throughout Northeast and Central Arkansas. We are also available to meet with clients in our Memphis, Tennessee office, so don't hesitate to contact us to set an appointment.