Living Trusts
Living trusts (also known as revocable trusts, inter vivos trusts and family trusts) are legal entities that can hold title to assets while permitting the trustees -- you and your spouse -- to have complete control over such assets as long as either of you is alive. Since they are revocable, you can change the terms, add and subtract assets and change beneficiaries and distributions whenever and however often you wish.
- Avoidance of Probate. Upon your death, assets, titled in your name, are frozen.
(Believe it or not, banks love an excuse to freeze assets). A primary purpose of probate courts
is to provide a legal forum for changing title to property. Therefore, if you change the title
to property before death to your trust, there is no need for probate.
- Reduce or Avoid Estate Taxes. Every individual U. S. taxpayer has a $1,500,000 estate tax exemption
(in 2003). In other words, you can pass on to your heirs up to $1,500,000 of assets estate tax free.
Your spouse may pass on the same amount for a combined total of $3,000,000. However, if you die without
first segregating your assets in a trust or some other legal entity, your assets simply go to your spouse
and your $1,500,000 exemption is lost. YOU MUST TAKE STEPS, BEFORE DEATH, TO PRESERVE THE $1,500,000 EXEMPTION.
Note: In valuing your estate, you must take into account all of your assets including, insurance,
property subject to inflation, pensions, IRA's, antiques, etc.
- Your Affairs are Private. Your Living Trust is a private document, known only to you, your attorney
and those of your family to whom you disclose it. As long as it is in force, you can avoid the public
scrutiny of the probate court.
- Managing the Inheritance. Often heirs are not capable of managing their own affairs. Minor children,
mentally incompetent heirs, handicapped heirs or heirs with serious addictions should have their assets
managed by successor trustees appointed by you who are better qualified to deal with your heirs' inheritance.
NOTE: A Living Trust will not protect assets against the claims of creditors or against personal bankruptcy.
Such protection can only be obtained through other entities such as family limited partnerships,
family corporations, irrevocable trusts or land trusts.
Do I need a Living Trust?
The big advantage to making a living trust is that property left through the trust doesn't
have to detour through probate court before it reaches the people you want to inherit it.
In a nutshell, probate is the court-supervised process of paying your debts and distributing
your property to the people who inherit it.
The average probate drags on for months before the inheritors get anything. And by that time,
there's less for them to get: In many cases, about 5% of the property has been eaten up by
lawyer and court fees.
Still, not everyone has to worry about probate, and some people don't need a living
trust at all. It depends on your personal situation.
If I Have a Living Trust, Do I Still Need a Will?
Yes. Your will affects any assets which, for one reason or another, were held in your
name alone at your death and not in your living trust or in some other form of ownership.
With the living trust, your will usually contains as its primary provision for the
distribution of your estate, a "pour over" provision, which simply directs that any
assets held in your name be transferred at your death to your living trust. Of course,
a probate is not avoided with respect to those assets which are transferred to your living
trust by your will.
Your will may also nominate the guardians of the person and estate of your minor
children, to care and provide for them.
Complete Estate Planning - Living Trusts - Living Wills - Power of Attorney
