A living trust is created during your lifetime and is funded with most or all of your assets by simply re-titling the assets to yourself as trustee.
A living trust is LIVING in that it takes effect immediately. You continue to enjoy all the present benefits of your assets without any changes in your ability to control them.
A living trust is revocable during your lifetime, which means that its terms are changeable and assets in the trust can be re-transferred to your name if desired without adverse tax consequences.
A living trust is a private agreement where the distribution of assets under the terms of the trust is not subject to the publicity given to wills in probate proceedings.
The complete flexibility of a revocable living trust means that one can be drafted to suit your individual needs and family situation.
When you create a living trust you can act as your own trustee, so there are no management fees or loss of control. You can change or modify the trust terms at any time, change beneficiaries, add or delete assets held by the trust without tax consequences.
A living trust does not complicate the management of your assets. While protecting your property within a living trust, you can do whatever you can do now with your assets and property. You can buy, sell, borrow, make gifts, etc. With a living trust you retain control over all your property and assets during your lifetime, and you determine distribution of your estate after your death. Since a living trust is revocable, it has no income tax consequences during your lifetime; no separate tax return is even filed, and all trust income is reported under your social security number.
With a living trust, you are also appointing someone else (a professional, a trusted friend, or a family member) to manage the assets in your trust for your benefit in the event of your incapacity (e.g., Alzheimer’s, a stroke, an accident, etc.) and, because the assets are in a trust, no court administered conservatorship will be required. Under a living trust, you have the successor trustee of your choice ready to step in and take over your affairs until you recover, or for the remainder of your lifetime.
REDUCE OR ELIMINATE ESTATE TAXES
AVOID PROBATE DELAYS
Probate is a court procedure that is required if your assets are distributed without a will, under a simple will or under a will with a testamentary trust. In court probate proceedings, the court changes the legal ownership of your property when you die. During probate the court must determine the validity of your will and supervise the payment of all your debts and taxes as well as the distribution of your probate estate to the people you name in your will.
This process may take six months to a year or longer and is a matter of public record.
Assets that you leave to your heirs by a will goes through probate, but property passed through a living trust does not. With a living trust you can avoid the delay in the distribution of your estate entirely; the assets of your estate can be distributed to your designated beneficiaries immediately upon your death.
ELIMINATE PROBLEMS OF GUARDIANSHIP OR CONTROL
Additionally, with a trust, you can continue the management of a beneficiary’s assets to whatever age you desire; certainly beyond age 18 (the age at which ALL guardianships must terminate).
The management of a beneficiary’s assets can include disbursement of assets and/or funds in increments, according to the directions you put in the trust (e.g., 1/3 distribution at age 25, 1/3 distribution at age 30, and the balance at age 35). Of course, the trustee can use any or all of the trust principal for the benefit of the beneficiary during this period. Also, if there is any question of management skills or capacity of the beneficiary, or to insure that your estate does not go to a son-in-law or a daughter-in-law, the trust can continue for the child’s lifetime and then pass to the child’s issue at his or her death. This will also keep your assets in your family rather than having them be subject to attachment by the state for medical treatment. You can protect the assets from any potential of dissipation of the entire estate while providing for the beneficiary’s needs, as determined by you. With a living trust these trusts are already in place at the time of your death and will begin immediately for the benefit and protection of your beneficiaries.
AVOID PROBATE COSTS
All of these fees and expenses can significantly reduce the estate to be distributed to your beneficiaries.
With a living trust these fees and costs can be greatly reduced. Your assets are transferred immediately to your designated beneficiaries outside the court system and in accordance with the directions specified by you in the trust agreement. Costs of administration of a living trust are minimal and are generally based on the actual time and/or services required.
CREATE A POUR-OVER PROVISION
PROTECT YOUR ESTATE FROM ATTACK
With a living trust, however, assets are not frozen and can be distributed to your designated beneficiaries immediately without the highly technical requirements of probate disposition.
The disgruntled heir would have to hire an attorney and file a civil suit against each beneficiary. The trust assets can also be protected from judgment creditor’s claims and/or lawsuits filed against you or your beneficiaries. In addition, you can protect a distribution to a beneficiary from being reached by the beneficiary’s creditors, from alimony attachments, from Medicaid spend down requirements, and even from the beneficiary him/herself.
PROVIDE CONTINUITY OF MANAGEMENT
AVOID MULTIPLE PROBATES OF REAL PROPERTY LOCATED IN NON-RESIDENT STATES