When it comes to estate planning, the most familiar document is the last will and testament. Most people have a basic understanding that a will allows you to appoint a personal representative (an executor) upon your death and directs that person to distribute your assets as you specify.
Put another way, a will says who gets your stuff when you die—but until you die, it does nothing.
A living trust is similar to a will in that it indicates how you would like your assets to be distributed after your death and can be amended anytime. While you should always have a will, a living trust—which is simply a trust set up during your lifetime as opposed to one created after your death—can be a valuable addition to your estate plan.
Upon your death, your estate can be settled more quickly. Like assets in beneficiary designated accounts, the assets in a trust are not required to go through the probate process, which can add uncertainty, delay and expense. Your beneficiaries will be able to zip past the inconvenience of a court-supervised distribution of your estate. Further, there is no waiting period for creditors to file claims, which is required when an estate is distributed through a will--even when there are no debts. You can also name the trust as a pay-on-death beneficiary or transfer-on-death beneficiary to fund the trust. These designations keep the assets out of probate but ensure that the assets are distributed and used according to the instructions in your trust.
You get to set out how and when your assets are distributed. You should also consider a trust if you have minor children or heirs with special needs. A nice feature of a trust is that you have the option to add terms that detail how and when a child or beneficiary is entitled to receive the assets. And, since a living trust is not a matter of public record (i.e., filed with the probate court), the distributions are protected from prying eyes of others.
Creating a trust need not be complicated. Once a trust is created, assets have to be moved into the trust so that they will be subject to the instructions you put into the trust document. This usually means changing the formal designation of ownership from one or more individuals to the name of the trust. While you are serving as trustee, you can have the same access and control over the assets as you would without the trust.
There are all sorts of trusts that can be used in a variety of situations. Some trusts offer asset protection for you during your life. Trusts can even be designed to protect assets now or to plan for management of long term care costs. A trust may make sense even if you don’t consider yourself to be wealthy. Trusts can save on court costs and delays, and allow you the flexibility to handle your own affairs as long as possible. Trusts can help you achieve a variety of specific needs. To discover if a living trust should be part of your planning, consult an experienced estate planning attorney. Together, you can review all of the details of your situation to craft a plan that meets your individual needs.
James M. Miskell received his law degree from the University of Georgia in 1993. His Asset Protection, Estate Planning and Elder Law practice has offices located in Lawrenceville and Johns Creek. He offers educational workshops and free consultations to assist clients as well as fellow professionals in creating individualized solutions. Visit his website: www.LetsTalkEstatePlanning.com. For more information, see his ad in this issue.