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What is a Living Trust?

HandelontheLaw.com Staff Writer

Thursday, December 19, 2013



What is a Living Trust?
Living Trust

In its simplest terms, a Trust is a plan by which “A” entrusts assets to “B” for the benefit of “C.” “A” is the grantor (the owner of the assets), “B” is the trustee (the fiduciary who manages the assets) and “C” is the beneficiary (the one who is supposed to benefit from the plan). “A” might also be “B”: a grantor can make himself/herself a trustee, with or without other trustees.
“A” might also be “C”: a grantor can make himself/herself a beneficiary, with or without other beneficiaries. A “Living Trust” is a version of that A-B-C plan that starts working during the grantor’s lifetime. Provisions of the Living Trust might continue after the grantor’s death but it starts working while he/she is alive. For that reason, a Living Trust is sometimes called an Inter Vivos (“between the living”) Trust. A Will, on the other hand, takes effect when the Will’s maker is dead.

Though people often ask, “Should I have a Living Trust or a Will?” it is possible to have a Living Trust and a Will. In fact, many experts advise simultaneously writing both a Living Trust and a “Pour Over” Will that will transfer the remainder of your assets into the Living Trust upon your death. Generically, Living Trusts and Wills are “different animals,” with different setups and operations. Unlike a Will, a Living Trust:

1. requires transfer of assets, forming the “body” of the trust;
2. requires only some of your assets;
3. controls only the body;
4. costs money to set up, fund and manage;
5. is not subject to probate by a Court and the associated costs;
6. does not necessarily require Court supervision of any kind;
7. can ensure the privacy of property distributions;
8. can allow you to manage your assets, then pass the body to another Trustee with special instructions in the event of:
a. your decision to stop acting as the trustee, or
b. your incapacity and/or disability; or
c. your death;
9. might reduce or avoid estate taxes that could otherwise be imposed (insubstantially, as a Will can be drawn up with tax-saving provisions, too).

As you have undoubtedly noticed by now, a Living Trust takes more effort and expense “up front.” So, should you have a Living Trust? That depends:

1. a larger estate with one or more significant assets might benefit from a Living Trust; however, if you have a small, uncomplicated estate, your simple Will can probably be probated with minimal effort and expense;
2. if you have minor children and/or “special needs” dependents requiring the focused assets management a Living Trust can give, then a Living Trust might be beneficial; however, if do not have minor children and/or “special needs” dependents, then a Living Trust probably isn’t worth your while.

Ultimately, you should consult with a lawyer who specializes in Wills/Trusts/Probate/Estate Planning to determine whether a Living Trust would benefit you/others enough to make the extra effort and expense worthwhile.

DO’S AND DON’TS

DON’T be intimidated by the process or the people.

DO consider a Living Trust if you:
1. have a larger estate with one or more significant assets;
2. have minor children;
3. have “special needs” dependents;
4. wish to avoid probate and the associated costs;
5. wish to ensure the privacy of your property distributions;
6. wish to provide for special management of your assets in the event of your incapacity or disability;
7. are willing to expend more effort and money than a Will requires.

DO write a “Pour Over” Will if you establish a Living Trust.

DO consult with a lawyer who specializes in Wills/Trusts/Probate/Estate Planning


By Kathy Catanzarite

[Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information cannot be guaranteed. Readers act on this information solely at their own risk. Neither HandelontheLaw.com, or any of its affiliates, shall have any liability stemming from this article.]


Source: Kathy Catanzarite - Handelonthelaw.com Staff Writer

Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information can not be guaranteed. Readers act on this information solely at their own risk. Neither the author, handelonthelaw.com, or any of its affiliates shall have any liability stemming from this article.



WILLS/TRUSTS/PROBATE DOS AND DON'TS

 


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