A Living Trust is usually a written legal document that serves as an alternative to a will. With a living trust, your assets (your home, bank accounts and stocks, for example) are transferred into the name of your living trust, administered for your benefit during your lifetime, and then transferred to your beneficiaries when you die. The living trust can be established for an individual or a couple, either legally married or registered domestic partners.
Although living trusts have been around for centuries, only recently have they achieved a high degree of popularity among the general public. The reason for this surge in popularity is that living trusts help to avoid probate. You might be wondering, “What is probate, and why is everyone trying so hard to avoid it?” The short answer is that probate is a court-supervised procedure for collecting a deceased person’s assets, paying debts and taxes, and distributing the property to the person’s beneficiaries (either according to the instructions the person set forth in his or her will or as determined by state law if the person died without a will). The probate process usually takes 8 or more months to complete, although it may take longer in complicated cases. (See our Probate tab for more information).
Most people name themselves as the initial trustee in charge of managing their trust’s assets. This way, even though your assets have been put into the trust, you can remain in control of your assets during your lifetime. You can also name one or more successor trustees (a person or an institution) who will manage the trust’s assets if you ever become unable or unwilling to do so yourself.
The traditional living trust is a revocable living trust (sometimes referred to as a revocable inter vivos trust or a grantor trust). Such a trust may be amended or revoked at any time by the person or persons who created it (commonly known as the trustor(s), grantor(s) or settlor(s)) as long as he, she, or they are still competent. For a couple, the trust may be drafted to remain revocable and amendable until after both persons are deceased, or could partially or fully become irrevocable on the first death. How the trust is structured is determined by our attorneys with the client based on their goals.
Features of your living trust agreement:
- Gives the trustee the legal right to manage and control the assets held in your trust.
- Instructs the trustee to manage the trust’s assets for your benefit during your lifetime.
- Names the beneficiaries (persons or charitable organizations) who are to receive your trust’s assets when you die. This could include specific gifts of assets or cash as well as the distribution of a percentage of the remaining assets.
- Gives guidance and certain powers and authority to the trustee to manage and distribute your trust’s assets. The trustee is a fiduciary, which means he or she holds a position of trust and confidence and is subject to strict responsibilities and very high standards. For example, the trustee cannot use your trust’s assets for his or her own personal use or benefit without your explicit permission. Instead, the trustee must hold and use trust assets solely for the benefit of the trust’s beneficiaries.
Among other things, the living trust can be used to protect beneficiaries from receiving their share of your estate in one lump sum, keep your assets out of the very costly probate process and, for a married couple, can help minimize estate taxes. (The tax due based on the size of your estate when you die)
A living trust can be an important part — and in many cases, the most important part — of your estate plan. The attorneys at Hoffman & Hoffman can help you determine the best estate planning option available to meet your goals and wishes. Contact our office for a no cost consultation today to discuss your options.