A living trust can be a useful part of an estate plan for Arkansas residents. However, it is important to understand its limitations and what assets it is not advantageous to include in such a trust.
A living trust offers a number of advantages. Assets in it do not have to pass through probate, it is private and you can change it during your lifetime as needed. It allows you to specify how and when distributions are made to heirs, which may be important to you if you are concerned about beneficiaries being irresponsible with their inheritance.
What to include
Among the assets that you can place in a living trust are mutual funds, stocks, money market accounts and bonds. You can also place your home or real estate in a living trust along with art, jewelry and other collectibles. A trust can be the beneficiary of your retirement account, but you should not place the accounts themselves in the trust because you will have to pay taxes on them as if you had taken a distribution.
What a trust cannot do
Trusts do not eliminate the need for a will. A pour-over will allows additional assets to move into your trust upon your death. A living trust is also not the right approach for avoiding estate tax. There are other strategies better suited to protect assets from creditors and other threats. In addition, there are costs associated with administering the trust, and it’s important to appoint the right trustee.
Some assets, such as life insurance or jointly owned property, pass directly to heirs without needing to go through probate or being placed in a trust. A living trust is not necessary for every estate planning scenario, but you may want to consider it if there are complexities associated with your estate.