Trusts
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A living
trust is a legal document that contains your instructions for what you
want to happen to your assets and how they are to be managed while you
are incapacitated or upon your death. When the trust instrument is drafted
and signed you transfer assets from your name into the name of the trust
which you control. However, unlike a will, a living trust avoids probate
at death. |
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The living
trust can control all of your assets and can prevent the courts from controlling
your assets if you become incapacitated. Unlike a will, a living trust does
not have to die with you. Assets in the trust can be managed by the trustee,
whom you have chosen, as you designate.
Usually these means until the beneficiaries of the trust reach certain ages.
It also allows you to provide for those loved ones who have special concerns.
A living trust should not be confused with a "living will." The living trust
governs your financial affairs. The "living will" is for medical affairs.
Generally, a person, no matter how old they are, how much they own, or whether
they are single or married should consider a living trust. If you own assets
which are held in your name, such as a home or certificates of deposit at
a financial institution, and want your loved ones (spouse, children or parents)
to avoid the problems of court interference at your death or incapacity, you
should consider a living trust.
Here are some quick answers to how a living trust operates: Usually the living
trust is revocable which allows you to make changes at any time you wish.
The person under the trust who controls the trust assets is call the Trustee.
You are usually the trustee and therefore you control the assets which you
transfer to the trust. At death, the successor trustee, whom you designate
takes over and is required by the trust document to pay debts and distribute
the trust assets in accordance with the terms of the trust which you have
created. There is no probate of your assets which are held by the trust.
The successor trustee can be an individual, professional trustee or corporate
trustee (bank or trust company). People usually designate a corporate trustee
or professional trustee to act as the sole successor trustee or as a co-trustee
with a family member if they believe that they or the successor trustee will
not have the time, ability or desire to manage the trust.
The expense of a living trust is usually higher than a will, but when compared
to the cost of probate and lost of control that comes at the time of death
or incapacity it is often far cheaper. The lawyers at Phelps, Schwarz &
Phelps will help you decide whether these cost savings of a living trust are
better for you. We can provide you with a estimate of the full costs of preparing
the living trust and transferring the assets which you want to have held by
the trust. However, you should recognize that there may be costs in administration
of the terms of your trust following your death. Your successor trustee may
charge for her time and retain a lawyer to assist her with administering the
trust. A corporate or professional trustee will charge fees associated with
the work he preforms.
If you have a living trust prepared we recommend that you also prepare a will.
This will is often referred to as a "pour-over will" and acts as a "safety
net," if you have forgotten to place some of your assets in the name of your
trust. Upon your death this will causes these forgotten assets to be transferred
to your trust. In this event, where some of your assets are not titled in
the name of your trust, these assets will be subject to probate, but what
happens to them will be controlled by your living trust because of the terms
of your pour over will.
©2000 PS&P