|
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.
- 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.
- 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 beside yourself is trustee.
- At
time of termination, there may be fees.
- There
are no immediate tax advantages.
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 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.
|
