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.
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.
