Living Trusts by Abacus
Created by you, a living trust is a legal document that is made during your lifetime. Similar to a Will, a living trust highlights what you would like to do with regards to your assets, heirs and any dependents you may have (children under the age of 18 or an elderly parent or grandparent for example). However unlike a Will, which only comes into effect after you die, a living trust bypasses the probate process and your appointed successor trustee (the person who takes over your position as trustee) will carry out the instructions you have documented in your living trust, on your behalf.
You may be wondering why you would need a Living Trust rather than a simple Will. If so, consider the following scenario.
1. Jane and John are married. They have Child A and B together. Jane and John have simple mirror Wills that leave everything to each other and then equally between their two children.
2. Jane dies. John inherits Jane’s entire estate.
In time, John marries Jill and they go on to have Child C. John and Jill have new Wills drawn up. They leave everything to each other and then equally between the three children.
Under this arrangement, part of Jane’s estate is therefore now being left to Jill, who she had never known, and Jill’s child. Jane’s own children are therefore losing out of a portion of Jane’s estate.
3. John dies. Jill inherits his entire estate (which includes Jane’s estate as well).
In time, Jill marries Bob and they go on to have Child D. Jill and Bob have new Wills drawn up. They leave everything to each other and then equally between Jill’s two children, Child C and Child D.
Under this arrangement, Jane’s entire estate is now being left to people she had no connection with, and her own two children have been excluded entirely. John’s estate will now only benefit his youngest child, Child C, and will also benefit Child D, with whom he has no relationship.
A Living Trust is the ideal solution to avoid this, or a similar eventuality. How you divide your estate is an important decision, and one which many people put a lot of thought into to ensure they are behaving fairly and that the correct people are benefitting. However, as demonstrated above, our lives and relationships are becoming increasingly complicated and, as we cannot predict what the future will hold, it is important to protect our families come what may.