Is a Living Trust for You?

All of us wish to provide financial security for our loved ones after our death, but we are often uncertain about the best way to do it.  A carefully considered estate plan will help you assess your goals and identify the best methods to achieve them.  To that end, you may wish to consider the benefits of a revocable Living Trust.  The marketing of revocable Living Trusts has given rise to a proliferation of misinformation about their benefits.  Such a trust is an important tool in estate planning.  However, it is not appropriate for everyone.

What is a revocable Living Trust?  A revocable Living Trust is created during lifetime, can be amended or terminated during the creator's lifetime, and is irrevocable upon death.  A trustee is appointed to receive and hold legal title to property and to thereafter administer the assets of the trust.  Typically, the creator of the trust is the initial trustee.  Just as in a Will, beneficiaries are named to receive the trust assets upon the death of the creator.  The purpose of the Living Trust is to administer assets during one's lifetime and to dispose of them upon death.  Therefore, the Living Trust will constitute the estate plan and is intended to be a substitute for a Will.  However, a simple "Pour-Over Will" may be needed if the grantor of the trust acquires assets after the trust is created and does not transfer them to the trust for whatever reason.  Moreover, parents with minor children must execute a Will in order to designate a guardian in the event of the grantor's death. 

It is important to understand that revocable Living Trusts by themselves do not avoid or reduce estate tax, nor is a revocable Living Trust needed to dispose either of assets held in joint tenancy or of third party beneficiary contracts, such as life insurance policies, IRA accounts, pension and profit sharing plans, etc.  In addition, if the grantor's estate does not exceed the $100,000.00 statutory minimum for a small estate, and the estate does not include solely owned real estate, the benefits of a revocable Living Trust could be minimal.

Some of the main reasons for having a revocable Living Trust are as follows:

1.       Probate avoidance - A Living Trust can be more convenient and can save the cost of administrator/executor's fees and attorney's fees;

2.       Privacy - While a Will is a public document that, upon filing as required by law, can be read by anyone, a Living Trust is not required to be filed in the public record;

3.       Asset management without court adjudication of incompetency - If a grantor becomes disabled due to mental or physical deterioration, a Living Trust may eliminate the need to seek the appointment of a guardian of the grantor's estate;

4.       Avoiding Will contests - the validity of the Living Trust may be more difficult to contest than a Will.

Estate planning necessarily involves more than a Will to dispose of assets upon death.  It requires careful examination of your values, goals, and needs, as well as your assets and the various forms of ownership available to you.  It may be appropriate to include a revocable Living Trust in your plan.  Please contact our office for more information on how to best choose an estate planning package that is right for you and your family.

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