18 May Do I Need a Living Trust?
Do I Need a Living Trust?
By: Barry E. Haimo, Esq.
May 18, 2015
BARRY HAIMO: A living trust is an enormously powerful estate planning vehicle. It will own your property, so you can avoid if not eliminate the need for probate proceeding. More importantly, relative to elder law if you become incapacitated, it will eliminate the need for guardianship proceedings. It will better enable you, as well as your estate, to transition more smoothly.
A trust refers to an arrangement where one person—called a trustee—holds the legal title to property for another person. A living trust is a trust that you create while alive, as opposed to one created after your death based on the terms laid out in your own will.
You can keep legal control of the property under your living trust during your lifetime by naming yourself trustee.
What are the Advantages of Living Trusts?
The main advantage of a living trust is to help your family avoid probate after you pass away. After you die, the property held in a trust automatically passes on to a person or group of people called beneficiaries—often eliminating the need to undergo the expensive and time-consuming probate proceedings.
This is also useful if you own property out of state, which can be easily transferred through a trust, but can be complicated to transfer through the probate process.
Trusts are also created to provide funds for young beneficiaries, who may not be mature enough to handle a large amount of money. Instead, the trust will be under the management of a trustee until the beneficiaries reach a pre-designated age.
There are other benefits to creating trusts. Certain types of living trusts can reduce estate taxes. Furthermore, the terms of a living trust are private. When a will is submitted to probate court, the contents of that will are made public, but the same is not true for trusts.
Living Trusts and Guardianship
One significant benefit of a living trust is its protection against guardianship proceedings in the event of legal incapacity. Legal incapacity may occur due to factors stemming from either mental, emotional and physical circumstances that are so severe that you are deemed unable to make financial and health decisions.
If for some reason you should become unable to manage your property—for example, if you fell into a coma or suffered brain damage—your family members would need to undergo legal proceedings to regain control of your finances. After a lengthy process, the courts would appoint an adult guardian to make financial decisions in your stead.
Under a living trust, however, a guardianship appointment could be avoided entirely. Instead, control of your finances would immediately transfer to a successor trustee that you have appointed if you become legally incapacitated.
When drawing up a trust, you can name a “disability trustee” for just this purpose. If you become incapacitated, your disability trustee has the legal authority to step in to regain control of any bank accounts, investment accounts, or business interests you may own.
Living trusts are one of the many tools you can use to effectively and easily transfer your life’s work into the hands of your family and friends. Consult with an experienced and knowledgeable estate planning attorney to craft the estate plan that will work best for you.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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