• December 8, 2023

Everything You Need to Know About Creating a Living Trust

Everything You Need to Know About Creating a Living Trust

Everything You Need to Know About Creating a Living Trust 1024 682 Patrick J. Thomas Agency

Navigating the world of estate planning can be complex, but understanding the concept of a living trust is essential for anyone looking to manage their assets effectively. Creating a living trust can inevitably become a major part of planning your estate, but it’s not always the best path to take. It heavily depends on your assets and financial situation as well as how you want your money to be manage before and after your death. 

What is a living trust, and is it right for your estate? Find out everything you need to know about creating and implementing a living trust as a part of your estate. 

What is a Living Trust?

A living trust, which is also known as a revocable trust, is a legal document that allows an individual (known as the grantor) to place assets into a trust throughout their lifetime. These assets are given to beneficiaries at the grantor’s death by a trustee that has been appointed. The most important distinction of a living trust is that it’s revocable, which means the person who created it can change or do away with it if they are deemed mentally competent. 

Assets that are normally placed in a living trust include: 

  • Real estate 
  • Financial assets and investments (retirement accounts and life insurance plans are normally not included) 
  • Personal property  

How Do Living Trusts Differ from Other Types of Trusts?

Living trusts differ from many other types of trusts, like irrevocable trusts, because they can be modified once they are established. Living trusts are flexible and easier to control. Irrevocable trusts, on the other hand, cannot be easily changed or terminated without the permission of the grantor’s beneficiaries or by a court order. 

Why Create a Living Trust?

There are many benefits to creating a living trust: 

  • Avoiding probate: living trusts allow you to avoid lengthy and potentially costly probate proceedings. 
  • Privacy: living trusts are not public records. 
  • Flexibility: living trusts can be altered or revoked if your circumstances or needs change. 
  • Continuity: living trusts allow easier management of your affairs if you become incapacitated. 

On the other hand, three are some downsides to living trusts: 

  • Costs and complexity: setting up a living trust can come with initial costs. They are also more complex than drafting a will. Make sure to work with an estate planning attorney if you want to set up a living trust. 
  • Management: you, or someone appointed, must actively manage the trust, which can include transferring assets and other responsibilities. 
  • Lack of tax benefits: some irrevocable trusts offer tax advantages. Living trusts, in general, do not.  

The Types of Surety Bonds Needed for Living Trusts

Surety bonds help protect the interests of the beneficiaries. They serve as a financial safeguard, ensuring that the assets in the trust are handled appropriately and in accordance with the trust’s terms. They also may be required to be obtained by the courts when setting up a living trust. The trustee that is appointed to oversee your living trust may be required to obtain a: 

  • Fiduciary Bond: these bonds protect beneficiaries should the trustee mismanage the trust’s assets. 
  • Trustee Bond: similar to a fiduciary bond, these bonds provide a financial guarantee that the trustee will comply with the terms of the trust. 
  • As always, consulting with a legal professional specializing in estate planning is recommended to navigate the specifics of your situation. 

Need to obtain a surety bond for the trust you are creating? Get in touch with the surety experts at The Patrick J. Thomas Agency today!