- What are the advantages and disadvantages of having a trust instead of a will?
- How can a person change a will?
- Is there any way a will would not be given effect after the testator's death?
- What is a community property state and how does it affect estate planning?
- What are some common issues connected with nursing home care?
- What is probate and how does it work?
- What are some of the tax consequences of estate planning?
- How does a grantor choose a trustee?
- How can a person leave property to minor children?
- What are some of the fiduciary responsibilities owed by a trustee to the beneficiaries?
- Learn More: Estate Planning
What are the Advantages and Disadvantages of a Living Trust?
A living trust, also known as a revocable living trust, holds legal title to the property of the person who creates the trust (the "donor"). The donor appoints a person to oversee and manage the trust (the "trustee"). During the donor's lifetime, the property in the living trust may be used for his or her benefit. At the donor's death, the trustee will then distribute the trust property in accordance with the terms of the trust.
One of the appeals of a living trust is that the trust can be revoked or changed at any time by the donor. Thus, the donor has the ability to gain access to any of the trust property during his or her lifetime. It is not uncommon for the donor to name him or herself as the trustee and to name a successor trustee to take over in the case of incapacity or death.
A donor can place any type of property he or she owns into the trust, including real estate, bank accounts, stocks, bonds and even community property. In order to fund a living trust (i.e. place property into it), the donor must take affirmative steps to transfer the property titles out of his or her name and into the trust's name. Merely creating a living trust does not automatically place property into the trust.
One of the biggest advantages of a living trust is that the trust property does not have to go through probate at the donor's death. When an estate is probated, it becomes part of the public record. Thus, anyone can find out the worth of the estate, the debts of the estate, who the beneficiaries are and other information.
However, there are certain instances when property held in a living trust can still become part of a public record. For example, in order to transfer the title of real estate into the living trust, many state public records offices will require a copy of the living trust to be filed with the deed transfer. Deeds are part of the public record.
While having a living trust may be one of the tools in your estate plan, it should not be the only tool. It is still necessary to have a will even if you have a living trust. These wills, commonly referred to as "pour-over" wills or wills with "pour-over" provisions, serve to stipulate how property not held in a living or other type of trust should be disposed of at the donor's death.
Recently, several states have experienced an upsurge in living trust fraud claims against organizations claiming to be living trust experts. These groups have been preying on elderly customers and charging them thousands of dollars for standardized fill-in-the-blank forms. These groups are not staffed by attorneys and the forms they provide may not even meet the requirements of state law.
Before creating a living trust, it is advisable to seek experienced legal representation from an estate planning attorney. Living trusts are better suited for those who have larger estates. An estate planning attorney can review your estate and help you determine if the living trust is the best tool for you, or if other estate planning documents would better serve your goals.
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