Planned Giving
Living Trusts
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.
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