BASIC BENEFIT
More and more individuals are putting their assets into revocable living trusts
which are completely flexible and broadly adaptable arrangements for management,
protection and distribution of a family's assets.
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 revocable 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 yourtrust for your benefit in
the event of your incapacity (e.g., Alzheimer's, a stroke, an accident, etc.); 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.
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REDUCE OR ELIMINATE ESTATE TAXES
For married grantors, the estate tax liability which would otherwise be due at the
death of the survivor can be greatly reduced or completely eliminated by proper
planning. This planning can be accomplished in a living trust (although it can also
be accomplished through wills, this would require a separate probate at the death
of each spouse). How much can be saved depends on the size of the estate and the
estate tax laws at the time of the surviving spouse's death. At the same time, the
trust can also insure that the estate of the first spouse to die will ultimately
go to his or her children (or heirs) even though the surviving spouse is provided
the lifetime economic benefit of all assets and has complete management and control
over the entire trust.
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AVOID PROBATE DELAYS
A living trust allows you to AVOID PROBATE.
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.
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ELIMINATE PROBLEMS OF GUARDIANSHIP OR CONTROL
With a trust, when minors are the beneficiaries the trustee can manage and invest
the trust funds, free of the costs and restrictions that arise when a court must
appoint and supervise a guardian of the property until the beneficiary comes of
age.
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 asset 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.
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AVOID PROBATE COSTS
When property passes through probate, you incur executor's fees, attorney's fees
and court costs, all of which can be quite substantial depending on the size of
your estate. These are fees generally set by state law and are usually based entirely
on the size of the estate being probated rather than on the amount of time and work
involved. There may also be additional extraordinary expenses of probate (i.e.,
tax returns, life insurance, etc.).
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.
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CREATE A "POUR-OVER" PROVISION
With a living trust you should create a "pour-over" provision in your will which
adds other assets to the trust at your death. Thus, all of your assets will be in
a single unified fund managed by one trustee under a single trust agreement.
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PROTECT YOUR ESTATE FROM ATTACK
When an estate goes through probate, the court freezes the assets and asks anyone
to come forward and contest the will if they please. Creditors are invited to come
forward with their claims and heirs may challenge certain bequests under the will
if they are disappointed because they received less than they had anticipated.
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 Medi-Aid spenddown requirements and even,
from the beneficiary him/herself.
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CONTINUITY OF MANAGEMENT
Creating a living trust can furnish needed attention to your assets. A living trust
permits you and/or your appointed trustee to take timely advantage of investment
opportunities and. conversely, to dispose of investments no longer desirable. With
a living trust, you set up the machinery to provide a continuity of management at
death and the immediate shift of income from yourself to your beneficiaries at your
death.
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AVOID MULTIPLE PROBATES OF REAL PROPERTY LOCATED IN OTHER
STATES
If you own real property in another state, that property will have to go through
probate in that state (know as an "ancillary probate"), in addition to a probate
in your state of residency. With a living trust you can avoid these additional probate
proceedings and have that property pass to your beneficiaries immediately according
to the terms of your trust.
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CONCLUSION
The many benefits that can be yours with a living trust should not be ignored or
put off; they are too valuable to you and to your beneficiaries
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