Life can be complicated. And sometimes, the thought of planning for the future feels like adding one more thing to an already busy life. At PJI Law, we believe in breaking down complex estate planning terms and processes into manageable steps.
One estate planning term you might have heard about is a ‘living trust.” In this blog, we’ll answer the question, “What is a living trust in Virginia.” We’ll also share how creating a living trust can benefit you, its disadvantages, and the steps involved.
If you have questions and want to determine if a Virginia living trust is right for you, contact a PJI Law, PLC team member at (703) 865-6100 for personalized service and attention. In addition to creating a living trust, we can review any existing estate plan to ensure your assets are protected.
What is a Living Trust?
A living trust concerns your assets – what you’ve earned, saved, and valued over the years. This legal tool helps you manage these assets while alive and specify how they’ll be distributed after your passing. A living trust safeguards your wealth and plays a vital role in a comprehensive estate plan, catering to different aspects of your well-being and legacy.
Types of Living Trusts
When creating a living trust, there are two main types: revocable and irrevocable. The revocable living trust is a popular choice for its flexibility. It allows you to make changes or even dissolve the trust at your discretion.
In contrast, an irrevocable trust stays true to its name. Once it’s set up, it can’t be changed or canceled. While that may seem inflexible, it offers certain advantages, such as protecting your assets from creditors and potentially reducing estate taxes.
Bear in mind irrevocable trusts are usually more suitable for complex estate situations, given you’ll need to let go of control over the assets within the trust.
Advantages of a Living Trust
So, why consider setting up a living trust in Virginia? Here are a few reasons:
One of the most significant advantages of a living trust is that it can help your estate bypass the often lengthy and expensive probate process. What does this mean in practical terms?
Imagine your loved one needing to wait for months to get access to the assets you left them because they’re tied up in court. With a living trust, this waiting period can be minimized or eliminated, making the transition smoother for your family.
Control Over Your Assets
One of the key benefits of a revocable living trust is the level of control it offers. Despite the assets being legally held by the trust, you retain comprehensive control over them throughout your lifetime.
This means that all aspects of your day-to-day life, from residing in your house to managing your expenses, will remain unaffected.
What’s more, even after your passing, you continue to exert influence over the trust. You determine when and how the assets remain in the trust and set the conditions for distribution to your beneficiaries.
Unlike a will, which becomes a public document after your death, a living trust keeps the details of your estate private.
That means you won’t have strangers knowing the exact distribution of your assets or the value of your estate. For many, this added level of confidentiality is a significant advantage of a living trust.
Disadvantages of a Living Trust
While a living trust offers several attractive benefits, some potential disadvantages exist.
Difficult to Setup without Professional Help
First, the setup process for a living trust can be more complex and time-consuming, if you are not working with experienced professionals. Each asset you own must be transferred to the trust, a process that requires detailed attention to ensure all legal requirements are met. This is why working with an estate planning firm that assists you with the funding process is of utmost importance.
Living trusts can be more expensive to establish than wills, owing to the additional legal and administrative work involved.
However, weighing these upfront costs against potential expenses, such as those related to probate proceedings and executor fees, is essential.
These charges can often represent a substantial portion of the probate estate, making the initial cost of setting up a living trust a worthwhile investment, and typically far most cost-effective than the probate process.
While a will becomes effective only upon your death, a living trust can have an impact during your lifetime.
For example, if you create an irrevocable living trust, you’re transferring ownership of your assets to the trust permanently, which can impact your control over these assets.
The Relationship Between Living Trusts and Wills in Virginia
Despite the efficacy of a living trust, a will remains an essential component of your estate plan for several reasons:
- Guardianship of minor children: You can’t designate a guardian for your minor children in a trust. If you have minor children, a will is necessary to establish guardianship.
- Distribution of assets not transferred to your trust: If you forget to transfer property to your trust or acquire new assets that aren’t added to the trust, these assets won’t be distributed according to the trust’s terms. A will acts as a safety net, ensuring these assets are distributed as desired.
Without a will, any property not included in your living trust will go to your closest relatives as per Virginia state law.
How to Create a Living Trust
Establishing a living trust is a thoughtful process that demands meticulous planning and execution. Here are the basic steps needed to set up a Virginia living trust:
1. Choose the Type of Trust
Consider whether an individual or a shared trust better suits your needs. Individual trusts are typically for a single person and their property, while couples often create shared trusts and include jointly-owned assets.
2. Identify Your Assets
Carefully consider the assets you wish to include in your trust. These could be real estate properties, vehicles, financial accounts, personal belongings, or business interests.
3. Appoint a Successor Trustee
Select a reliable person to assume control of your trust after your passing. This trustee will administer and distribute your trust’s assets according to your wishes.
4. Name Your Beneficiaries
Choosing your beneficiaries is an important part of setting up your living trust. You’ll need to think about who should inherit your assets – family, friends, or favorite charities.
Consider the unique needs of your beneficiaries. For instance, you might arrange for assets to be distributed at specific milestones for younger recipients.
And remember, with a revocable living trust, you can change your beneficiaries or distribution terms anytime as life changes or as your wishes evolve.
5. Draft the Trust Document
This is the most crucial step in the process and requires meticulous care. The trust document sets the rules for managing and distributing the trust assets and should be comprehensive, leaving no room for misunderstandings or uncertainties.
We highly recommend seeking professional legal help to ensure the document is legally sound and comprehensive.
6. Execute the Trust Document
Once the trust document is prepared, it needs to be signed in front of a notary public and should follow certain formalities. This process makes the document legally binding.
7. Transfer Your Assets
After the trust has been created, you need to transfer your assets into it, which involves changing the legal titles of these assets to your name as trustee of your living trust. Each asset type has its own process for this.
For example, transferring real estate requires a new deed, while bank accounts require new account designations. Ensuring that all relevant assets have been properly transferred into the trust is crucial.
8. Review and Revise as Needed
Remember to revisit your living trust periodically or when significant life changes occur. A revocable living trust offers flexibility, allowing you to adjust it as your circumstances or preferences change.
Making such important decisions can be challenging, but remember, this is your legacy. Take the time to think it through, and don’t hesitate to seek professional guidance to help navigate this process.
PJI Law, PLC: Your Partner in Estate Planning
Creating a living trust is a decision that requires careful thought, thorough understanding, and professional guidance. At PJI Law, we are committed to providing the support you need to make these important decisions.
Our dedicated team of experienced Virginia estate planning attorneys understand the intricacies of Virginia’s estate laws and can help you navigate this journey.
At PJI Law, each client receives our complete dedication, personal attention, and courteous, white-glove service, ensuring that your living trust aligns with your personal goals and family’s needs.
No need to search online for “trust and estates attorney near me.” Call our office at (703) 865-6100, or complete our online form to schedule your consultation with our Fairfax, Virginia living trust legal team today.
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The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.