Living Trusts: The Most Important Estate Planning Tool

A living trust is a legal instrument that holds title to an individual’s or family’s personal assets, including bank accounts, real estate, LLCs, and interests in stocks, etc. Like a will, a living trust contains your instructions for the distribution of all your assets after your death. One main difference between a will and a trust is that a trust prevents probate, while a will does not. The succession of a will requires the filing of an expensive probate procedure, newspaper publication notices, letters to all heirs, even if they have been disinherited, and statutory waiting periods. Additionally, probate records are public information.

Using a living trust prepared by an attorney is one method of avoiding this costly, intricate and confusing probate process. When a person’s assets are transferred to their living trust during their lifetime, probate is avoided entirely. After the person who established the living trust, who is called the Settlor, dies, the successor trustees, who are usually the Settlor’s adult children or relatives, distribute the assets of the trust to designated designated beneficiaries. Because the living trust eliminates probate and can often, in many circumstances, greatly reduce estate taxes, it is possible to pass on a much larger portion of your estate to your heirs.

It is a very common misconception that holding property jointly provides testamentary protections similar to a living trust, however this is not the case. Joint tenancy only prevents probate upon the death of the first co-owner, but the surviving co-owner will be left with the same succession problem unless planning is implemented after the first death. This is usually not a good time to plan, due to the life changes and emotional stress and trauma associated with losing a spouse. In addition, joint tenancy can also cause a loss of increment in the basis of the inherited property, which can lead to unnecessary capital gains taxes. In conclusion, the execution and funding of a living trust prepared by an attorney, when both spouses are in good health, prevents probate and eliminates the possibility that a surviving co-owner may not be able to carry out future estate planning due to incapacity. or an accident.

Benefits of a living trust:

• Probate is avoided, including multi-state probate if you own property in other states.
• Succession involves public court proceedings that can last two years or more; Whereas trusts are private and can be administered very quickly, which your heirs and successor trustees will greatly appreciate
• The people who set up the trust are the trustees for their lifetime and have full control over the assets of the trust, including the power to easily change or revoke the trust.
• The trust for a married couple can be designed to maximize the estate tax exemption, which can result in potential tax savings for the heirs of more than a million dollars.
• The trust will not cause a change in income taxes; tax returns remain exactly the same throughout the life of the Settlor
• The trust may hold corporate shares or ownership interests in an LLC, so that the company and its assets avoid succession.
• Living trusts can be established for individuals or as a joint trust for married couples, bringing all of their assets under one plan.
• Prevents judicial control of assets in case of incapacity or death
• Provides maximum privacy.
• Faster distribution of assets to beneficiaries
• Assets can remain in trust even after your death if you wish.
• You can reduce or completely eliminate estate taxes
• Economical, easy to install and maintain
• Can be changed, modified or canceled at any time before the Settlor dies
• hard to dispute
• Prevents judicial control of succession and guardianship processes for minors
• You can protect dependents with special needs
• Prevents involuntary disinheritance and other joint ownership problems
• peace of mind