A living trust is a legal document that places ownership and control of property into a trust, managed by a trustee for your benefit. Here’s how it works:
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Creation: You set up a living trust while you’re alive. As the grantor, you execute a trust document that establishes the trust. You transfer ownership of property to the trust and appoint a trustee to manage it.
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Beneficiaries: You name beneficiaries who will inherit the trust property after your death. These assets transfer directly to beneficiaries without going through probate.
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Trustee: You can choose to be the trustee initially, retaining control. Alternatively, you can name a successor trustee who takes over if you become incapacitated or pass away.
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Legal Requirements: Creating a living trust involves drafting a formal legal document (typically called a Declaration of Trust). You must learn your state’s requirements and work with an estate planning attorney for enforceability.
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Property Transfer: To activate the trust, transfer ownership of assets into it (e.g., sign a new deed for your house). If not transferred, the asset isn’t controlled by the trust.
Remember, a living trust helps avoid probate and provides flexibility during your lifetime.