Broker Check
6 Benefits of Living Trusts

6 Benefits of Living Trusts

| March 10, 2024

Are you worried about your children receiving their full inheritance or spending all your money after your death? Maybe you just feel the need to keep your family’s money and your family’s business. Either way, it might be worth setting up a living trust while you still have control over your finances and assets. 

What Is a Living Trust? 

A living trust is a legal arrangement where you, as the creator of the trust, place assets (stocks, bonds, real estate, a business, etc.) in the possession of a trustee while you’re alive. Once you die, the trustee distributes the assets according to your wishes. 

A living trust is a valuable estate planning tool that can accomplish several major goals, including protecting your wealth and reducing your tax bill. There are two types: revocable trusts and irrevocable trusts. 

A revocable trust gives you control over the living trust. You can even name yourself as the trustee if you wish. You can also change the trust as long as you’re alive. By contrast, you can’t modify an irrevocable trust — once it’s set, that’s that. As such, you must be careful about how you lay out an irrevocable trust. 

Here are half a dozen key benefits of a living trust and why you should consider establishing one. 

  1. Reduce Taxes

Not all states have estate taxes, but the federal government levies an estate tax. If your estate’s assets exceed a certain value, the federal government will assess an estate tax. You may be able to avoid reaching the specified limit and being forced to pay an estate tax by placing your assets in an irrevocable trust. 

That’s a benefit after you’ve passed. However, you might also reap some tax benefits while you’re alive by placing certain assets in an irrevocable trust. Doing so can keep income from those assets from being classified as taxable income. 

  1. Avoid Probate

Unlike a will, which must be filed with the courts, a living trust is private. If you were to die without a will, the courts would decide the future of your estate in a process known as probate. This process can make information about your assets public record. With a living trust, the public can’t access information about your assets. 

Another advantage of avoiding probate is that your assets may be distributed faster to your heirs since there will be less red tape to get in the way. 

  1. Protect You if You’re Incapacitated

If you become incapacitated, a living trust allows your trustee to carry on your business affairs and manage your assets. This includes managing the trust for your benefit — to help take care of you. Such an arrangement can be particularly valuable if you’re single and have no children. 

With a living trust in place, your trustee can pick up running your affairs without the courts intervening. 

  1. Protect Minor Children

Living trusts can help ensure that your minor children are cared for in your absence. A trust can hold money for your offspring, and you can decide the age at which they’ll receive it. You can also configure disbursements so your children will receive money regularly for the rest of their lives. 

  1. Save Your Heirs From Themselves

If you have grown children who struggle with substance use, have a history of poor financial decisions, or simply never seemed to pull it together enough to support themselves, it may be unwise to put a large sum in their possession. 

A living trust allows you to take care of your grown children after you’re gone without simply handing over the money from your estate with no strings attached. Instead, the money you designate for your children can be held in the trust, and a trustee can dole it out as needed. 

  1. Ensure Family Privacy

As mentioned, a living trust is a private arrangement. The type of assets in the trust, their worth, and how you gained them will be known only to those named in the trust. 

A will doesn’t provide the same degree of protection,  nor does it afford any privacy, as it becomes a public record that anyone can review upon the signer’s death. 

Learn More About Living Trusts 

It’s difficult to put a price on the knowledge that the wealth you’ve spent a lifetime building will be handled as you wish after you pass. The financial advisors at Good Life Morehead City can offer that confidence. We always take the time to listen, and we can help you understand how estate planning can benefit you. 

If you’re ready to learn more about living trusts and estate planning, contact us today to schedule a free consultation.