Family Trust vs Living Trust: Which One is Best For You?
Understanding Family Trusts and the Benefits of Longevity
Organizing a living trust can be a very effective way to protect your assets. There are multiple types of trusts choose from, and they all are ideal for different situations, so understanding the differences can be helpful. The two main types of trusts are irrevocable and revocable trusts. Both of these types of trusts can be used to set up a living trust or family trust. A family trust is a legally binding document that is often used to create a financial legacy for your loved ones. Family trusts are a type of living trust. It can be revocable or irrevocable, depending on the best strategy.
Why Do You Need a Trust?
Before listing the differences between family and living trusts, we will first go over why you should consider setting up a trust. There are many reasons to create a trust and below you can find the top 3 most important ones:
You will have control over your assets
Unlike a will, a trust will give you control over the assets. You will be able to make changes to the legal document as you see fit.
Avoid probate
One of the most significant advantages of setting up a family or living trust is the fact that you can avoid probate. The ability to avoid probate makes it possible for the heirs to cut court costs and reduce taxes.
Provide extra care to children with special needs
If you or a family member has children with special needs, creating a trust will provide them with protection even after your pass away.
The Differences Between Family and Living Trusts
Expanded lifespan for Family Trusts
Family trusts are designed to remain active even after you pass. The family trust will have an expanded lifespan, which makes it possible for the grantor to distribute assets based on milestones. For example, you can decide to give your nephews access to funds once their graduate. Family trusts are meant to live beyond the grantor’s life.
Living trusts include multiple beneficiaries
Living trusts allow the grantor to distribute assets to their beneficiaries after passing. It’s important to highlight that the list of beneficiaries can include family members, friends, pets, and more. On the other hand, family trusts can only include direct family members of the grantor.
Living trusts offer more control over assets
In general, the grantor is also the trustee of the trust. Therefore, the grantor will receive full control over the assets that are held inside the trust. Once the grantor passes or certain demands are met, the assets are divided to the beneficiaries according to the grantor’s specific instructions.
Family vs Living Trusts: Which One is Better?
Choosing to set up a trust is the best way to protect your assets and reduce taxes. A family trust is ideal if you want to give all your assets to family members. However, a living trust is better suited if you have multiple beneficiaries in mind, such as a close friend or pet. We are here to discuss and help plan the most effective strategy for your estate.