LIVING TRUSTS

A Living Trust

Today, many non-attorneys, paralegals and paraprofessionals are "selling" living trusts as if trusts had just been invented.  Inter vivos (meaning during lifetime) trusts have been with us for many generations.  Rather than relying on a one-size fits all computer programs or sales person, it is important that an estate plan be based on an individual's or a couple's specific needs and circumstances.

A Living Trust is an estate planning tool that has many benefits.  It can be useful for persons who are older or anyone who need assistance managing assets or it can be a way to avoid probate and its associated costs.  There are many types of trust, each with its own advantages, such as trusts for tax planning or trusts for persons with disabilities.  But an improperly prepared document may result in greater costs, a court action to modify the trust, or tax liability where none need have existed.

While there are many benefits of a Living Trust, three of these benefits are:

Avoiding Probate

Probate is a process under which the court supervises a person's Last Will and estate.  This process can be time consuming and costly.  This is especially true where the sole asset is a residence.  The cost of probate and attorney and executor fees may cause the home to be sold in order to pay these fees.  This may not be what the individual had in mind.

Avoid Conservatorship

When a person loses capacity to make decisions about his or her health care or management of assets, a court supervised process known as a conservatorship may be necessary.  This is very often the case where a person has not made advance decisions about who should manage his or her estate.  As with any court procedure, the result is often costly and there is a loss of privacy.  While there are many cases where the conservatorship is an appropriate means to protect an individual or the estate, this should be your choice rather than the only alternative.

In many instances, a Living Trust can avoid the need for a conservatorship.  It can name someone else to manage the trust if and when the person can no longer do so.  The result is that you have created a means to manage your affairs without the intervention by any other person or the court.  You choose the person(s), and you can even include specific instructions about how the assets are to be managed.

Carry Out Your Wishes

A Living Trust can be created to accomplish many tasks.  For instance, if you have a family business, you may wish to name a special trustee who can act to assist with the management of that business, but not your personal matters.  Or, you may instruct the trustee and the agent appointed under a Durable Power of Attorney to work together to carry out your wishes with regard to making gifts, such as educational needs of a child or grandchild; or to take certain actions in case of the need for long term care; or to take other actions specific to your family or personal situation.

Creating a Living Trust

After meeting with your attorney, a trust document is prepared.  That document will set forth information about you, your family or other personal information, it will provide for your wishes during your lifetime and distribution after your death.  For instance:  Do you have minor children or grandchildren for whom special provisions should be made?  Are you in the habit of making gifts and wish those gifts to be continued or discontinued?  Is your estate large enough that tax provisions should be included? 

After the Trust document is signed, it is important that assets be transferred into the trust.  Your attorney should assist you in this or provide you with information about how to accomplish this very important task.  While the title to your bank accounts, or residence or other assets may change, your ownership and control does not.

After the Trust is Signed

Uncertainty about what happens in the future, after the Living Trust has been signed, is common.  In creating a Living Trust, you retain management and control of your assets.  Generally, you do not need to report to anyone, or file different tax returns.  The assets and income are used for your personal benefit, or for the benefit of any other person or persons you name as beneficiaries.

Magic Documents

Trusts are not magic documents!  BUT!, the creation of a trust does not mean that your estate need not pay debts or taxes after your death.  It is important that you select an individual who will work to carry out your wishes and settle your estate and then make the distributions as you have directed.  One problem, which may arise in the future, is appointing an unsophisticated individual who will not take the time investigate his or her duties as a trustee.

Summary & Conclusion

Creation of an estate plan to meet your individual needs requires professional assistance.  There are numerous organizations and individuals "selling" estate plans.  Unfortunately, these documents are usually a "one size fits all" documents and not tailored to address your individual needs.  Luckily, there are steps you can take to "fix" trusts, which either have not been properly drafted or in cases where circumstances have changed.  However, these may be more costly that proper planning in the beginning and there may be limitations on the extent of the "fix".

The information set forth above is intended to be a brief summary only of some of the often asked questions about Living Trusts.  Other considerations not addressed include tax planning or planning for a special needs child.

I hope that you will call our office and come in for a visit so that we can discuss your needs.