Living Trusts…to Do or Not to Do?
By Heather Faucher | Posted on June 18, 2009 | Filed Under Estate Planning
Have you ever thought about setting up a living trust to help protect your assets? Or are you scratching your head and asking, “What the heck is a living trust?” Trusts are, simply put, legal documents declaring that someone is holding property for the benefit of another. The person holding the assets is called the trustee, and the party they are holding the assets for is called the beneficiary. Trustees owe a fiduciary responsibility to their beneficiaries, meaning they cannot waste or steal the trust assets. Living trusts, logically enough, are created when the beneficiary is still living, and are typically established to avoid probate proceedings–which can be a major pain in the behind, both time and money wise.
Another advantage to using a living trust is that those who own property in more than one state may be able to avoid their assets going through probate in both states, also known as ancillary probate. When property is held in a living trust, it may not actually need to go through ancillary proceedings.
One other pro is that of privacy. Probate proceedings are matters of public record, so anyone can discover who got what. Living trusts, on the other hand, are deemed private matters. For those who wish to keep their ultimate beneficiaries undisclosed, the living trust can provide that extra layer of privacy.
Of course, as with anything, there are downsides to living trusts. Contrary to popular opinion, using a living trust does not mean you will save on estate or income taxes. This bears stressing because some people either do not hear it or do not believe it. The grantor of the trust has to pay tax on income obtained from the property and also must pay estate taxes even after having transferred assets to a living trust.
<!– /* Font Definitions */ @font-face {font-family:”Cambria Math”; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:0; mso-generic-font-family:roman; mso-font-pitch:variable; mso-font-signature:-1610611985 1107304683 0 0 159 0;} @font-face {font-family:Calibri; panose-1:2 15 5 2 2 2 4 3 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:-1610611985 1073750139 0 0 159 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:”"; margin-top:0in; margin-right:0in; margin-bottom:10.0pt; margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:”Calibri”,”sans-serif”; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:”Times New Roman”; mso-bidi-theme-font:minor-bidi;} .MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:”Times New Roman”; mso-bidi-theme-font:minor-bidi;} .MsoPapDefault {mso-style-type:export-only; margin-bottom:10.0pt; line-height:115%;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} –>
/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:”";
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin-top:0in;
mso-para-margin-right:0in;
mso-para-margin-bottom:10.0pt;
mso-para-margin-left:0in;
line-height:115%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:”Calibri”,”sans-serif”;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:”Times New Roman”;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;}
Living trusts can also take a bigger bite out of your wallet. You’ll have to pay legal fees for creating the trust, which usually range from $750 to thousands of dollars. The trust will also incur administrative and recording costs. Another negative is one which many people don’t think about. The mere act of transferring property to a living trust doesn’t necessarily protect those assets from creditors. If someone is granted a judgment against you, that creditor can attach all of your assets to satisfy the judgment–including any assets transferred to a living trust.
Living trusts can definitely be a good choice for some people. It’s a good idea to do a total check of assets to assess whether this option is best for your particular situation. And you’re still going to need to draft a will, something so many people hate to think about until it’s too late. Protect your assets and your heirs today and get your estate planning rolling. It’s definitely a “to do” rather than a “to don’t”!
About this Post
Tags: Estate Planning, living trusts, trusts
Permalink | Trackback |
|
Print This Article | Leave a Comment
Comments
Leave a Reply
The opinions and information on this blog are not intended as legal advice. They are for informational and entertainment purposes only, and should not be construed as legal advice on any subject matter. Click here for the full disclaimer.
Other Resources
