Living
Trusts
Over
the last two decades, the popularity of Living Trusts
has skyrocketed. No longer a tool just for the rich,
Living Trusts are one of the most common estate planning
tools in use today.
This legal arrangement, usually drafted by an estate
attorney, creates a separate entity called a Living
Trust. A Living Trust is called that simply because
it is created while you're alive (as opposed to a "testamentary"
trust created after death).
 The
Parties Involved
The Living Trust document itself names three different
parties. The individual (or couple) that establishes
the Trust is named the Grantor (also
referred to as the Trustor).
The Trustee is the person named by
the Trust as the controller of the Trust's assets (and
in many cases, the Trustees are the same people as the
Grantors).
On the receiving end, the Beneficiaries
are the heirs that will benefit from the Trust once
the Grantor's have passed away.
History
of Living Trusts
Living trusts date back to 16th century England, when
landowners used trusts to circumvent the King. Constantly
concerned with landowners owning too much land, the
King made sure he could oversee the distribution of
property when a landowner died. This process of overseeing
transfers was the very first form of probate.
Trusts with the Church helped landowners skip the process
altogether. Landowners would deed their property to
their Church, in exchange for the promise that the Church
would grant the land back to heirs when the landowner
died.
In colonial times, the first settlers in America brought
English custom and law with them across the Atlantic.
This included the concepts of probate and trusts. Trusts
were long considered the domain of the rich, since they
were often expensive to create.
It wasn't until the 1960's that revocable living trusts
gained popularity. And while the increased acceptance
of living trusts ticked off many attorneys (since they
stood to lose probate fees), the living trust was here
to stay.
Who
Needs A Living Trust?
Almost anyone with an estate of $100,000 or more can
benefit from having a living trust. Estates of $100,000
or more are often subjected to probate in their state
of residence, which can cost anywhere from 2%-4% of
the estate's value in court and legal fees.
The living trust also is useful for individuals subject
to estate taxes. Through a living trust, a couple is
able to maximize their Unified Credit to its fullest.
It even accomplishes protection for individuals wanting
to avoid conservatorship.
Advanced living trusts can be structured for complicated
family situations. Re-married spouses, with children
from a previous marriage, can use an advanced revocable
trust to ensure kids receive their proper inheritance.
Our FREE Living Trust Special Report offers a checklist
for individuals to determine if the living trust is
an appropriate strategy for them.
Avoiding
Probate
Living Trusts avoid probate, since they are completely
private. Because a trust is recognized as a separate
legal entity, distributions can be made by a Trustee
to named beneficiaries without any involvement from
the courts.
The courts maintain no control over the Trust's assets,
and do not tie up the assets in a lengthy (and costly)
probate process. The Trustee simply distributes assets
to named heirs, but only if those assets have actually
been placed inside the Trust.
Funding
Your Living Trust
Once established, almost anything can be placed in a
trust: savings accounts, stocks, bonds, real estate,
life insurance, and personal property. In "funding"
the trust, you simply change the name or title on your
assets to the name of your Trust. Many people worry
about losing control of assets; however, that is not
the case within a carefully-constructed Living Trust.
Always
There For You
Because the Trust is essentially controlled by one individual
(the Trustee), that person can carry out your wishes
when you're not able to. For instance, if you have children
from a previous marriage and wish to leave them an inheritance,
specific instructions to the Trustee will ensure that
they receive what you had requested.
If you're institutionalized or unable to care for yourself
anymore, the Trust can still function and make distributions
as needed. The Trustee has a fiduciary responsibility
to see that your requests are fulfilled exactly. He
or she can even provide care and protection for disabled
relatives or handicapped children in accordance with
your wishes.
Reducing
Estate Taxes
The Living Trust also minimizes estate taxes by fully
utilizing every individual's Unified Credit. The Estate
Tax Credit, as mandated by Congress, currently shelters
up to $2 million from estate taxes. With only a will
in place, a married couple will receive a single $2
million exemption.
However, if a Living Trust with "A-B Provisions"
is in place and one spouse dies, the Living Trust separates
into two separate trusts (commonly referred to as an
A-B Trust).
 In
an A-B Trust, each of the two separate trusts receives
its own $2 million exemption, meaning a total of $4
million is sheltered from estate taxes.
Any amounts over that $4 million will be subject to
estate taxes, with rates climbing as high as 46%.
Living Trusts are easy to start-up and require little
on-going maintenance. They affots remain out of the
public record even after your death. However, they do
not provide protection against creditors or divorce,
and do not reduce estate taxes for estates over $2 million
in value ($4 million if married). rd an extra measure
of protection against loss of control, and ensure that
your asse
Special
Circumstances
Each family's situation is different. Some will benefit
from a living trust, while others may not.
If you are married or have assets over $100,000, you
owe it to your family to investigate the best means
to preserve your hard-earned wealth.
And for estates over $2 million, you may want to combine
a living trust with another advanced estate planning
technique.
At
Penney and Associates, we are committed to providing
the best possible service so your law related
needs are handled with the utmost professionalism.
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