A living trust is useful for people who want to be able to control their assets during their life as well as after their death. For many it is a useful tool to use to avoid the probate process after death. However, a common misconception is that if you have a living trust you do not need a will. This is not the case.

Furthermore, living trusts can be beneficial to those who have significant assets because they can limit the amount of estate and inheritance tax that the assets are subjected to. This said, it is important to weigh your assets and the cost of developing a living trust because it can be expensive and if you do not have a significant amount of assets it may not pay off.

Living trusts can be revocable or irrevocable. The most popular type of trust is a revocable living trust, which allows the settler to make changes to the trust during their lifetime. Revocable trusts generally direct the trustee to pay all income to the settler until their death when the assets are then directed to named persons. Revocable trusts avoid the process of probate but don’t protect the settler’s assets from federal or state taxes.

Irrevocable living trusts are usually set up to reduce estate or income taxes. For tax purposes, the trust becomes a separate entity; the assets cannot be removed, nor can changes be made by the settler. In most cases, the settler cannot be sole trustee without losing the intended tax benefits.

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