There are a multitude of reasons to have a living trust. We can’t begin to cover them all, but we will touch on three reasons very briefly here.
Reason #1: Protecting Property for Certain Beneficiaries
When most of us think about estate planning, we think about passing our property to our family and other loved ones after we die. However, sometimes our intended beneficiaries are unable to handle an inheritance. Minor children are the most common example of this. Minor children aren’t even allowed to own property in many states. In most states, a guardian is appointed to hold the property on behalf of inheriting children until they are legally old enough to own property. Even then, if you speak to parents of an 18 year old, they might cringe at the idea of their teenager receiving any large sum of money. An 18 year old with outright legal ownership of money might very well quit school, buy a sports car, and head to Hawaii. Having a living trust alleviates this problem.
Reason #2: Managing Property upon Incapacity.
If you can believe it, one major concern today is the idea of living too long! Many people worry about whether or not their parents can live in their own homes. Many worry about how their parents’ bills are being covered and about the safety of their money from other people. Unfortunately, in the case of parents who have not done adequate estate planning, the only option is to file an application with the probate court for a guardian. That’s a jaw-grinding experience, because it exposes personal and financial information to total strangers. Besides, it’s a humiliating indignity to be declared legally incompetent.
Don’t put your own children through that painful experience.
A revocable living trust solves this problem. A revocable living trust allows your successor trustee to take control whenever you resign or are incapable of handling your affairs. There is typically no interruption in the management of assets, and there is no court supervision. Revocable living trusts also enjoy a greater level of acceptance throughout the legal and financial community, and almost all states provide a broad range of statutory powers regarding the management of trust property. While it is true that a living trust isn’t effective unless your property is in the trust, a durable power of attorney will enable your attorney-in-fact to transfer property into your trust if you can’t do it on your own. Of course, we can help you with all of the details.
Reason #3: Avoiding Probate.
When you die, property in your revocable living trust will not go through probate. That’s because the living trust itself spells out who gets to take ownership of the property. It’s very similar to 401(k) plans, life insurance, annuities, IRAs, and company retirement plans. Since those properties each have a designated beneficiary, those properties do not go through probate but, rather, pass directly to the beneficiaries (often with some tax advantages).
Jointly owned property with a right of survivorship does not go through probate either. It passes automatically to the surviving joint owner. Unfortunately, relying completely on joint tenancy laws is not advisable. It’s entirely possible that both joint tenants die at the same time or that the surviving tenant passes away without having specified who should inherit the property. A revocable living trust spells that out in advance.
Estate Planning can be Daunting
The process of planning your estate can be a daunting task. The good news is that you don’t have to do it alone, because we are a law firm dedicated to helping you develop and monitor a complete plan that achieves your desired results and minimizes the obligations of your loved ones.
If you’d like to learn more about what that means, call our office today to schedule a Family Wealth Planning Session. We normally charge $750 for a Family Wealth Planning Session, but to give you an opportunity to consult with us and understand the estate planning process, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.