Revocable (Living) Trusts
Whether you're seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility--many types of trusts exist, each designed for a specific purpose. A trust is a legal entity that holds assets for the benefit of another. Basically, it's like a container that holds money or property for somebody else. You can put practically any kind of asset into a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. The assets you choose to put in a trust depend largely on your goals. Since trusts can be used for many purposes, they are popular estate planning tools. Trusts are often used to:
· Minimize estate taxes · Shield assets from potential creditors · Avoid the expense and delay of probating your will · Preserve assets for your children until they are grown (in case you should die while they are still minors) · Create a pool of investments that can be managed by professional money managers · Set up a fund for your own support in the event of incapacity · Shift part of your income tax burden to beneficiaries in lower tax brackets · Provide benefits for charity
A living trust is a special type of trust. It's a legal entity that you create while you're alive to own property. Property that passes through a living trust is not subject to probate--it doesn't get treated like the property in your will. This means that the transfer of property through a living trust is not held up while the probate process is pending (sometimes up to two years or more). Instead, the trustee will transfer the assets to the beneficiaries according to your instructions. The transfer can be immediate, or if you want to delay the transfer, you can direct that the trustee hold the assets until some specific time, such as the marriage of the beneficiary or the attainment of a certain age.
Living trusts are attractive because they are revocable. You maintain control--you can change the trust or even dissolve it for as long as you live. Living trusts are also private. Unlike a will, a living trust is not part of the public record. No one can review details of the trust documents unless you allow it. Living trusts can also be used to help you protect and manage your assets if you become incapacitated. Despite these benefits, living trusts have some drawbacks. Assets in a living trust are not protected from creditors, and you are subject to income taxes on income earned by the trust. In addition, you cannot avoid estate taxes using a living trust.
· Minimize estate taxes · Shield assets from potential creditors · Avoid the expense and delay of probating your will · Preserve assets for your children until they are grown (in case you should die while they are still minors) · Create a pool of investments that can be managed by professional money managers · Set up a fund for your own support in the event of incapacity · Shift part of your income tax burden to beneficiaries in lower tax brackets · Provide benefits for charity
A living trust is a special type of trust. It's a legal entity that you create while you're alive to own property. Property that passes through a living trust is not subject to probate--it doesn't get treated like the property in your will. This means that the transfer of property through a living trust is not held up while the probate process is pending (sometimes up to two years or more). Instead, the trustee will transfer the assets to the beneficiaries according to your instructions. The transfer can be immediate, or if you want to delay the transfer, you can direct that the trustee hold the assets until some specific time, such as the marriage of the beneficiary or the attainment of a certain age.
Living trusts are attractive because they are revocable. You maintain control--you can change the trust or even dissolve it for as long as you live. Living trusts are also private. Unlike a will, a living trust is not part of the public record. No one can review details of the trust documents unless you allow it. Living trusts can also be used to help you protect and manage your assets if you become incapacitated. Despite these benefits, living trusts have some drawbacks. Assets in a living trust are not protected from creditors, and you are subject to income taxes on income earned by the trust. In addition, you cannot avoid estate taxes using a living trust.
