|
A Living Trust is a
legal document that enables you to
leave instructions for who you want
to handle your final affairs and how
you want your assets distributed after
you die. Living Trusts look a lot
like a will but, unlike a will, a
Living Trust does not go through probate
(providing privacy concerning assets
included in the living trust),  it
prevents the court from controlling
your assets if your are declared incompetent,
and it gives you (not the court) control
over the assets in the trust that
you leave to your minor children and/or
grandchildren.
A Living
Trust can be revocable or irrevocable
(you cannot change it or take out
assets that have been placed in it).
When you establish or set up the trust,
you are called the Grantor
(sometimes Settlor or Trustor).
You will also name a Trustee
to manage the assets you place in
the trust. Many people name themselves,
continuing to handle their affairs
as they would have without the trust.
Married couples often establish themselves
as Co-Trustees. In case one
of the Co-Trustees becomes incapacitated
or dies, the other instantly has control,
without court involvement, of the
assets in the trust.
A Successor Trustee
needs to be named in case you (or
both of you in the case of Co-Trustees)
becomes incapacitated or dies. This
can be an individual (your adult children
or dependable family friends) or a
Corporate Trustee (a bank).
Each type, revocable
or irrevocable, has advantages and
disadvantages.
Revocable Living Trust
Advantages
- You see your trust work.
- You avoid probate and the trust
can be used to avoid ancillary probate
- that is probate of property in
another state.
- You avoid the attendant publicity
of probate.
- You will probably save your estate
a substantial amount of fees and
costs.
- You can provide for uninterrupted
management in case of incapacity.
- You can avoid interruption of
management at death.
- It's a good way to pass property
to charity and save taxes at death.
- You can change your mind.
Disadvantages
- Initial cost and trouble of setup.
Property must be transferred to
the trust.
- It slightly complicates subsequent
dealings with the property.
- It may require payment of an annual
trustee's fee if someone besides
yourself is trustee.
- At time of termination, there
may be fees.
- There are no immediate tax advantages.
 Irrevocable
Living Trust
Advantages
- You see your trust work.
- You observe your trustee in action.
- You avoid probate and court costs.
- You probably will save some fees.
- It is a good way to pass property
to charity.
- You save any taxes there may be
on the property going to charity
upon your death.
- With irrevocable charitable remainder
trusts created while you are living,
you can get an income tax deduction
during your life.
- You may save taxes on capital
gains on property placed in a charitable
remainder trust.
Disadvantages
- Property must be transferred,
so there are initial costs and energy
in setting up the trust.
- You lose all control over the
property with most irrevocable trusts.
- It requires annual fiduciary accounting
and possible tax returns.
- It may require payment of annual
trustee fees.
- There may be fees at the time
of trust termination.
- You can't change your mind and
get the property back.
Return to the Glossary.
|
