Planning with Living Trusts

A Living Trust (also called an inter vivos trust) is one of the most important estate planning tools. It allows you to stay in control of your affairs throughout your lifetime. You decide who will handle your affairs if you become disabled. You ensure that your assets go to whom you want, when you want, at the least cost, and maintain your privacy and avoid fees by staying out of the Probate Court.

There are several benefits and advantages to establishing a Living Trust. Indeed, a living trust is a main feature of modern estate planning, and can be used for several key purposes:

  • avoiding probate
  • managing assets flexibly
  • taking advantage of tax laws
  • maintaining privacy

Let’s look at each of these aspects in turn.

Avoiding Probate

Avoidance of probate is one of the main reasons that people create Living Trusts. The document allows you as the grantor to decrease the value of your "probate estate"–the total value of the all the property in which you hold an interest at the time of your death.

Upon your death, property that is not jointly held, does not have a named beneficiary, or is not in a trust must go through probate.  However, if you create a Living Trust, the property in that Trust will not be part of your probate estate and thus not subject to the probate procedure. It is a way for you, therefore, to avoid the uncertainty, complexity, and cost of probate by declaring your donative intent while you are alive.

 
Managing Assets Flexibly

In most situations, the Living Trusts we write are revocable. This means that you can amend, add to, or even completely terminate the Trust agreement. In addition, you can name trustees and beneficiaries yourself, and change the designation of trustees and beneficiaries, as circumstances change.

You can also designate a professional trustee (such as a bank or other financial institution) to manage your assets and give you periodic updates, so that you may still direct your investments but be free of the burden of day-to-day activities.

 
Taking Advantage of Tax Laws

There are three basic taxes that are addressed in estate planning:

  1. Estate tax (imposed on property transferred by a Will)
  2. Inheritance tax (imposed on person who inherits property from another)
  3. Gift tax (imposed when property is gratuitously transferred to another person)

Trusts can often be used to reduce or even eliminate these taxes.  Married couples can take full advantage of the tax credits available to each spouse and double the amount of their estate that can pass tax free to their heirs. Sometimes irrevocable trusts are suitable vehicles for even greater tax savings.

 
Maintaining Privacy

Unlike a testamentary trust (also called a Will), which is a public document, a Living Trust is a private document. This means that no one, other than the beneficiaries, has a right to know the contents of a Trust. This privacy can help to avoid bitter feuds over the distribution of assets.

We can assist in creating and funding a Trust that will ensure your estate is properly managed and your loved ones are provided for.

Please don’t hesitate to contact us to help you decide what’s right for your situation.

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