Friday, March 22, 2013

Do You Need A Living Trust?

Living trusts are a much talked about topic in the field of estate planning, and for good reason. You may have heard financial planners or attorneys mention these trusts as a "must have" item in your planning portfolio, but may be confused as to what a living trust really is, what it accomplishes, and most importantly, if you really need one.
What Is A Trust?
A trust is an arrangement in which one person, the trustee, holds legal title to the property of another person or group of people, the beneficiaries. Every trust must have at least one trustee, one beneficiary as well as property which is placed into trust, called the corpus. A trust document sets out the rules that the trustee has to follow when managing, distribute, and generally overseeing the corpus. A living trust, also known as an inter vivos trust, is a trust which is set up by the settlor (person creating the arrangement and funding the trust) while he/she is still alive.
How Does This Benefit Me?
A. Reduces Cost: When a person passes away, assets titled in his/her name pass either under the will or by the laws of intestacy which dictate how assets are distributed if there is no will. Either process requires the intervention of the local Surrogate's Court and, most likely, an attorney. An attorney will typically charge 3-5% of the total value of the probate estate which is in addition to a similar amount charged by the executor/administrator. With a revocable living trust, there is a slightly higher initial fee to set up and fund the trust, but it is usually a fraction of the cost of probating a will.
B. Saves Time: By going through the judicial process of probate, the validity of your will is open to challenges by disinherited heirs and other interested parties. Intestate heirs, also known as distributees, can challenge the validity of a will if they stand to receive more money if there had not been a will at all. The probate/administration process can protract the transfer of assets by months in the best case scenario and years in the worst. This can delay getting your assets to those who need them and costs your estate unnecessary legal fees. Since a revocable living trust is not a public document and does not need to be filed with the court in order to distribute assets, there is less unnecessary delay in transferring the assets since the trust does not need to be probated. You will not have to waste time waiting to get letters testamentary appointing an executor since a successor trustee is appointed automatically by the trust. Additionally, while a living trust can be challenged, it is more difficult to do so than with a will.  All this means that your final wishes will be executed as quickly as possible.
C. Give You Control: Since a living trust will be prepared by you, typically in consultation with your attorney, you retain full control to specify what will happen to your assets when you pass away. You set the terms, pick the trustees, and direct them how/when to invest, manage, and distribute your assets.  Best of all, you retain complete control of the property in the trust while you are alive by naming yourself as trustee. Since the trust is revocable, you can amend or revoke the entire trust any time you wish.

Article Source:

No comments:

Post a Comment