Trusts are not just for the wealthy. Many clients are hesitant to consider a trust because they believe trusts are only for people with lots of assets. In reality a living trust should be the primary estate planning tool for most estates. A revocable living trust is an excellent tool to plan for incapacity and reduce estate administration, i.e. probate, costs.
What is a Revocable Living Trust?
A revocable living trust is a document used to manage a person’s assets. The trust is created with a person creating the trust, called a grantor, signs the trust document and creates a separate legal entity. The grantor then transfers their property into the name of the trust. The trust document appoints a person called a trustee who holds title to the trust property and performs the day-to-day management of the trust. The grantor, alone or with the spouse, typically serves as trustee of the trust as long as he or she is competent to do so. With a revocable trust the Grantor can change any of the trust terms or abolish the trust during his or her lifetime. Therefore, the Grantor never loses control over his or her property.
At the grantor’s death or grantor´s incapacity, the trust becomes irrevocable. Upon death or incapacity of the grantor, a successor trustee is appointed according to the terms of the trust document. The successor trustee then is responsible for distributing the trust assets, or retaining the assets in further trust. The trust document provides the instructions for the successor trustee.
The assets that are held or received by the trust can remain in trust long after the grantor’s death. This allows the grantor to keep a trust in place for a spouse, children, grandchildren or even great-grandchildren. This can allow peace of mind to a grantor especially when there are concerns about conflict between their children or concerns about a child or spouse wasting the inheritance.
What are the advantages of a living trust?
A revocable living trust has several advantages over a will.
First, if the grantor becomes unable to serve as trustee for health or other reasons, a successor trustee steps in to manage the trust for the grantor´s benefit. The successor trustee steps in and pays the grantor´s debts and living expenses. Generally, a living trust is safer than a general power of attorney for purposes of managing the grantor’s property in the event of his or her incapacity.
Second, assets held in the trust are not part of the grantor´s probate estate. This usually reduces the expense of estate settlement as there is no probate tax. The executor´s commission and fees paid to the Commissioner of Accounts are also reduced.
Third, trust administration is usually a much quicker process than probate. Probating a Will can take months and in some cases years. The assets of a trust can usually be administered and distributed in as little as a few weeks.
Finally, a revocable trust remains private. The value of the assets held in the trust at death, and the disposition of those assets, are only revealed to those who have an interest in the trust. A Will is recorded with the clerk of the circuit court and is available for public
Other types of Trusts
There are many other types of trusts that can be utilized by a your estate planning attorney. These trusts may be used to protect assets or support a charity. These trusts are complicated and require careful planning. Often with the assistance of your accountant and financial advisor. We at Paul & Perdue Attorneys have a relationships with a team of professionals and are ready to serve you with all our your estate planning needs.
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