Why Create A Living Trust?

10th March 2009

A living trust is essentially a revocable, inter-vivos or lifetime trust agreement. Established by a settlor during his or her lifetime, the settlor transfers some or all of his or her property into the trust which is then established and signed by the settlor, as well as the Trustees.

So what is a Trust? 

Trusts are an important aspect of the English legal system. They are a multi functional legal tool predominantly used to ensure that property is dealt with in an acceptable way after the death of the owner, or in a situation where an individual no longer holds the capacity to do so themselves. 

Trusts in their various guises are also a very effective tool that can be used by many individuals and families to help save tax and accurately protect the different interests in property and assets. 

Why Create A Living Trust?  

1. The most commonly cited reason for creating a living trust is the avoidance of probate. Probate is the legal process whereby the estate of a decedent is administered; this can often be a long and costly process at an already difficult time.

Assets that are placed in a living trust, however, are considered separate from the remainder of the estate, and as such they are not required to go through the probate process.  

2. Another particularly attractive function of a living trust is to provide peace of mind regarding assets in the event that the settlor becomes incapacitated or otherwise incapable of dealing with those assets. A living trust allows for the settlor to appoint successor trustees, who will assume responsibility for managing the trust if the original settlor-trustee becomes unable to do so.

The appointment of a trusted family member or friend to this position ensures that an individual’s assets will always be dealt with in a satisfactory manner. Indeed, the trust need not even be funded during the lifetime of the settlor.

3. Asset protection is another significant benefit of a living trust. Some individuals use living trusts to mitigate the effects of bankruptcy. When bankruptcy is declared, creditors have almost free reign to take the bankrupt individual’s assets in order to recoup their loans.       

Assets transferred into a living trust, however, are no longer legally owned by the individual but rather by the trust itself. As a result, creditors are unlikely to be able to ‘attack’ these assets. Clearly there are a number of questions to be answered regarding the morality of this choice.

A living trust can be an effective tool used to protect assets individuals who may have a claim to your estate, either during your life or after your death.

We are expert Trust Solicitors in Bournemouth with solutions to all your Trust problems. Simply contact us today on 01202 802 807.