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What Is a Living Trust?

A living trust provides lifetime and after-death asset management including property. If you are serving as your own trustee, the trust instrument will provide for a successor upon your incapacity or death. Court intervention is not necessary. If an accident or illness renders a person disabled, the successor trustee can manage the trust property. The expense, publicity, and inconvenience of court-supervised distribution of your estate can be avoided, as a result.

With properly written and funded Living Trust you can:

  • Avoid probate on your estate
  • Plan for the possibility of incapacity or death
  • Control what happens to your property after your death
  • Use it for an estate of any
  • Prevent your financial affairs from becoming a matter of public record

While a trust sounds appealing, there are drawbacks. A living trust is more expensive to set up than a typical will because it must be actively managed after it is created. A living trust only can control those assets that have been placed into it. You need to ensure you fund the trust and transfer assets before you die or the trust will be of no benefit as your estate will still be subject to probate and there may be significant estate tax issues.

Will vs. Living Trust Considerations

While there are many reasons to establish a trust, do not overlook the fact that it will involve more upfront effort and expense. Answer these questions to determine if you should make the extra effort and invest in the expense of a trust:

Is informal probate an available option? Most states have a simplified form of probate for estates under a certain value threshold (that amount varies by state). A will could be appropriate if your estate could pass under an expedited form of probate, or if you live in a state where probate is not a complex or burdensome process,.

Do you have minor children? A trust allows you to establish provisions specifying when a minor will be entitled to any inherited assets held in trust.

Do you have dependents with special needs? The access or control those beneficiaries have over their inherited property may need to be limited. With a standard will your property can be passed on to those heirs, but a will does not allow you to exercise the level of control that may be needed over their use of the property.

Will your estate be subject to estate taxes? If your estate exceeds the current estate value tax threshold, you may to consider setting up a trust with tax planning provisions. The estate tax threshold changes frequently, so check with the IRS to determine if estate tax is a concern for you.

Will you actively manage your estate plan? A living trust may not be a suitable solution if you are unable or unwilling to do this. A trust will only be beneficial if assets are transferred into it. This means it is of utmost importance to know the status of your estate when dealing with a living trust.

So which option is best for you? A living trust and a will accomplish similar objectives. A trust, however, allows you to realize other objectives that a will cannot. But, those advantages come a price. Whether or not a living trust is better for you than a will depends on if the additional advantages outweigh the added cost. When choosing, keep in mind that one size does not fit all. the right option for you may not be right for the next person. Your estate plan should be prepared in a way that best serves the need and goals for you and your loved ones.

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