Living trusts are often the topic of small talk at social gatherings or on the golf course, but not many people know what they actually do. They are “living” because they are created now, while you are alive. You sign it and it becomes an enforceable document. Your living trust can be revocable or irrevocable. A revocable trust can be revoked or amended by you. An irrevocable trust cannot be changed by you once it is signed. Because an irrevocable trust cannot be changed, you want to be extra careful to understand its terms. The vast majority of people will start with a revocable trust.
A typical estate plan includes a will that “pours over” your assets to a revocable trust. On your death, any assets in your name alone will become part of your estate. Your will then directs the executor of your estate to hand them over to the trustee of your trust to administer them. An effective estate plan will, however, look to remove this step to avoid probate altogether and set up your assets to automatically “end up” in your trust. Your will can then act as a safety net catching any assets you have forgotten to transfer into your trust.
For estate planners, this is where it gets fun. A trust can address many issues, depending on the trust language. Below are nine things you can do with a living trust.
Reduce estate taxes. If you are married, the trust can provide for estate tax savings. Depending upon the state in which you live, a properly drafted and administered trust can save significant amounts in estate taxes on the death of the second spouse.
Protect minor children. A trust can hold the money for minor children until they are responsible enough to manage the money themselves. A trust lets you choose and define the circumstances under which your children receive certain assets form your trust. Many clients prefer to give the children access to the monies staggered over a period of time i.e. at ages 25, 30 and 35.
Save your grown-up kids from themselves. If your child will most likely never be able to manage the money themselves due to a drug or alcohol issue, or because they are just bad with money, the trustee can hold the money in trust for your child’s lifetime and distribute it as needed.
Keep your assets in the family. If your child is getting married and you do not like her fiancé, you should have a trust. In the event they divorce, you do not want half your assets winding up with your ex-son-in-law.
Take the sting out of the fling. If you are concerned that in the event of your untimely death, your grieving spouse will take up with the pool boy, or the cocktail waitress at the country club, putting the assets in trust with a professional trustee will make sure your spouse does not take all the money and give it to his or her latest fling.
Avoid probate. If you put your assets in the trust during your lifetime instead of relying on your will to do that when you die, you can avoid probate. It is not difficult to do – you need to transfer ownership from your regular bank account to a Trust account or name the trust as the beneficiary of your account. – An experienced financial advisors or lawyer can assist you with this and walk you through proper beneficiary designations.
Ensure your family’s privacy. If you have a will that is probated, it will become a matter of public record along with certain other information such as the value of your assets, identification of your beneficiaries and heirs, and often, an inventory listing all of your specific assets. A living trust, on the other hand, is a private document- no probate necessary.
Protect yourself while you are alive. If you fund the trust during your lifetime and later become incapacitated, the successor trustee will be able to manage the trust assets for your benefit. This is important for people who are single, and for those who do not have children. You want a trust in place that will provide for you in the event you are unable to make decisions for yourself.
The reality is that most people can benefit from a living trust. Talk to your lawyer about whether a living trust can indeed help ease your estate planning heartburn.
Abraham | Law: Experienced and Exceptional Estate Planning Representation
Michigan Estate Planning Attorney Mathew J. Abraham and ABRAHAM | LAW have been providing effective legal representation to individuals and businesses for over Twenty-Five years. If you have questions about estate planning or probate issues, you should call ABRAHAM LAW at 810-750-0440 or reach out through our online request to schedule an initial consultation.
As a Michigan estate planning attorney, Matthew Abraham engages in close and careful consultation with his clients so that he prepares documents that are custom fit for each client’s particular situation. Abraham Law prepares estate planning documents so they will accurately and effectively speak to the unique wishes and goals of each client.