Living Trusts

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.

  1. 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.

  2. 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.

  3. 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.

  4. 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.

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