Estate Planning

What is a living trust?

A living trust is a legal document created to hold your assets and dictate how they will be used during your life and disposed of after your death. This is different from a will in that a will only deals with the disposition of your assets after death.

A living trust allows you to maintain total control of your assets until the time you need assistance from a successor trustee. The tax identification number of a living trust is the same as the owner's social security number, so there is no separate tax return.

Why create a living trust?

A living trust accomplishes two important things:

• It allows for orderly transition of your financial management to your future financial caretaker without resorting to a power of attorney document.
• Assets owned by the trust avoid probate, so transfer of your assets is a private affair and does not go through the courts. This will keep estate costs down.

Who should have a living trust?

People with very simple assets such as their house, retirement plans, and small bank accounts are fine without a living trust as long as they have a valid power of attorney in place so their future financial caretaker can easily take over their duties.

People with more complicated asset structures will benefit from a living trust the most. Taxable brokerage accounts, large bank accounts, real estate other than homestead, and collections are best placed in a trust.

Funding a trust

The most important part of having a trust is to make certain it is funded correctly. Accounts and deeds to property must be retitled in the name of the trust. Collections should have paperwork created that directs the trust as owner of the collection. If the trust is not properly funded, assets left out of the trust will go through probate which can be time consuming and costly.

Consult a reputable estate planning attorney to determine if a living trust is right for you.