The term “living trust” is generally used to describe a trust (a) which you can create during your lifetime, and (b) which you can revoke or amend whenever you wish to do so. You can also create an “irrevocable” living trust that is permanent and unchangeable, and is almost exclusively done to produce certain tax results.
The choice of a living trust should be made after consideration of a number of factors.
The most exciting title arrangement that allows a person to avoid probate is called the “living trust.” The living trust, or revocable trust, is a device which holds all of your assets during life, allows you full control over your assets, can give you and your heirs added protection from creditors, and can efficiently distribute your assets after your death avoiding the probate costs and delays.
The Revocable Living Trust avoids probate, the court procedure that occurs at the time of death.
A living trust is actually a pretty straightforward device. It is simply a separate entity (analogous to a corporation) which holds your assets. You retain complete control over your assets while you are alive and mentally competent. Upon your incapacity or death another person (called the “trustee”) steps into your shoes and manages your assets for you. This trustee can be a relative, a friend, or a professional fiduciary (like a bank). Avoiding the probate process is critical, as your trustee can distribute your assets in an expedient manner to your heirs.
In addition to the shorter delay in distribution, a trust also can make it more difficult for creditors to collect money from you or your heirs; as they are forced to sue the trustee or the beneficiaries, which can be a time consuming process. This difficulty in collections also carries over by analogy to relatives wanting to “contest” the trust; as a trust is much more difficult to get overturned than a traditional will.
One of the greatest features of the living trust is that it enables you to avoid the need for a conservatorship should you become incapacitated. A conservatorship is a court administered process, similar to the probate process, which costs you money and can be very frustrating and time consuming for your heirs. Avoiding a conservatorship may be even more important than avoiding the probate!
A fallacy has developed that living trusts are complicated and burdensome to maintain; this is just not true. A living trust is completely revocable and amendable. This essentially means that it can provide for whatever you want; and if it doesn’t say it already, it can be added. Except for the initial setting up of a trust, when our offices get everything “placed” into the trust (the “funding process”), you never have to do anything different with your assets than if you owned them outside of a trust.
While you are living, the trustee (who may be you) is generally responsible for managing the property as you direct for your benefit. Upon your death, the trustee is generally directed to either distribute the trust property to your beneficiaries, or to continue to hold it and manage it for the benefit of your beneficiaries. Like a will, a living trust can provide for the distribution of property upon your death. Unlike a will, it can also (a) provide you with a vehicle for managing your property during your life, and (b) authorize the trustee to manage the property and use it for your benefit (and your family) if you should become incapacitated, thereby avoiding the appointment of a guardian for that purpose.
You should complete a will even if you have a living trust which provides for the transfer of any assets held in your name at your death to the trustee of your living trust. This is so any assets not included in the trust may be divided under your wishes as set forth in your living trust.
With a Trust, a married couple can pass twice the amount to their children without estate tax (tax at death). If you have real estate in more than one state, a Trust can eliminate probates in all states.
The Law Offices of Bing Bush is experienced in all facets of Trusts and their relationship to estate planning. We evaluate your particular situation and help you establish the proper documents to see that your wishes are carried out while minimizing taxes and avoiding probate, if possible, saving you and your loved ones time and money.