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SHOULD I CREATE A REVOCABLE LIVING TRUST?

Q&A: How a Trust Works; Is It Right for Your Family?

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A Living Trust: What is it and should I have one?

Is a Living Trust Right for My Family?A Living Trust, also known as a revocable inter vivos trust, is an alternative way to own property. You can create a Living Trust during your lifetime by signing a legal document that directs how property transferred to the trust will be managed, when and to whom the income from the trust property will be paid, and to whom the trust property will be distributed when you die.

You are called the settlor, grantor, or trustor of the trust, while the person to whom you transfer your property is called the trustee. The persons who will receive the income during your lifetime or who will receive the trust property after you death, are called the beneficiaries. You may be the settlor, a trustee, and a beneficiary, all at the same time. The property in the trust is called the trust principal, corpus, or res.

The primary purposes of a Living Trust are twofold: 1) The trust, if properly funded, can avoid the probating of your assets, and 2) The trust allows you to provide for your own while living (as well as for the care of your spouse, children or others) and then the distribution of your property upon death.


How does a Living Trust avoid probate?

Property you transfer into a Living Trust before your death doesn't go through probate. The successor trustee -- the person you appoint to handle the trust after your death -- simply transfers ownership to the beneficiaries you named in the trust. In many cases, the whole process takes only a few weeks, and there are no lawyer or court fees to pay. When all of the property has been transferred to the beneficiaries, the Living Trust ceases to exist.

In order to avoid probate, you must transfer the ownership of each and every asset you own to the trust. To transfer real property, a deed must be signed and escrowed or recorded; transfer of publicly traded stocks and bonds will likely require the services of a broker; transfer of partnerships and closely held corporations may require the review of the governing instruments to determine whether other partners or stockholders must consent to such transfer; assets without formal legal title such as household contents and farm machinery will require a bill of sale.

Any property which you do not transfer to the trust will be subject to distribution as set out in your will or the laws of your state that provide for distribution of your estate if you do not have a will. You should have a will to cover any assets that are not transferred to the trust. This may be a "pourover will" which transfers any property which you own at the time of your death to your Living Trust or a will which has other provisions. Unlike a will, a trust can also be used to specify how your property will be managed during your lifetime, in case you become incapacitated.


Who should be named trustee?

You may be the only trustee or you may be a co-trustee. You may name another individual(s), or financial institution with trust powers, as your trustee. You should also provide for a successor trustee to act in the future in the event of your disability or after your death. Anyone you select as a co-trustee or successor trustee should be capable and trustworthy.


What are the primary advantages of a Living Trust?

1) After your death, the trustee will distribute the trust assets directly to the beneficiaries without the need for having a probate court authorize the transfers. This is particularly beneficial if you own real estate in more than one state.

2) It may be more difficult to contest than a will.

3) You can avoid the necessity of having a conservator (someone appointed by a court) manage your property if you become incompetent. but only if all of your property is in the trust.


What are the disadvantages of a Living Trust?

1) To effectively avoid probate, you must keep track of your assets and keep all of your property in the trust, including property acquired after you create the trust.

2) You may have to pay trustee's fees and expenses if you use a third party as trustee, including the costs of filing an annual trust income tax return.


Does a Living Trust save taxes?

Living Trusts are not designed to save on taxes at death. Assets in a Living Trust are fully taxable in the individual's estate. However, with the proper use of a revocable trust, the federal estate tax will not apply to most married couples - this is the result of the federal martial tax credit.


Once I sign my Trust document, can I change my mind?

Yes. While you are alive and competent, you are in complete control of your trust. You may change or terminate the trust at any time provided the trust document specifically gives you that right.


Must I Hire an Attorney to Create My Trust?

Of course there are always those who will say that an attorney is the ONLY way to go. But for many people -- perhaps 80-85% -- a standard Revocable Living Trust for basic assets using common funding mechanisms is an easy and affordable way to get the benefits of a Living Trust without the significant expense of an attorney-drafted solution. Deciding whether or not to use an attorney or to 'do-it-yourself' comes down to how comfortable the person is with his or her ability to read some basic directions and answer some straight-forward questions.

 

 

Ready to CREATE YOUR OWN Living Trust legal document?
See Standard Legal's Living Trust Legal Forms Software >

 

Want to LEARN MORE about Living Trusts?
See our Q & A on Living Trusts at 'Ask Standard Legal' >

 

 


DISCLAIMER REGARDING LEGAL ADVICE: None of information contained on this web site is intended to constitute legal or other professional advice, and you should not rely solely on the information contained on the site for making legal decisions. When necessary, you should consult with an attorney for specific advice tailored to your situation.



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