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.
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.
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).
type, revocable or irrevocable, has advantages and disadvantages.
- You see your trust work.
- If you are not your own trustee, you observe
the trustee in action.
- You avoid probate and the trust can be used to
avoid ancillary probate - that is probate of property in another state.
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
- It's a good way to pass property to charity and save taxes
- You can change your mind.
- Initial cost and trouble of setup. Property must be transferred to the trust.
- It slightly complicates subsequent dealings with the property.
may require payment of an annual trustee's fee if someone beside yourself is trustee.
- At time of termination, there may be fees.
- There are no immediate
Irrevocable Living Trust
- You see your trust work.
- You observe your trustee in action.
avoid probate and court costs.
- You probably will save some fees.
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.
- Property must be transferred, so there is initial cost 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.
Click here to return to the Glossary.
For more information or a confidential discussion of your charitable options, please email or call the Vice President and Chief Advancement Officer, Joanne Bean, at 207-893-7891.
Please note, individual financial circumstances
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