The estate plan you create will likely include a wide variety of interconnected tools and strategies that work together to achieve all of your estate planning goals. One of the most popular of these tools is a living trust. In fact, many people include more than one living trust in their estate plan given the numerous goals that can be furthered with the help of a living trust. To help you decide if a living trust should be part of your estate plan, a Londonderry living trust attorney at DeBruyckere Law Offices explains the top three uses for a living trust.
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also called a Maker or a Grantor, who transfers property to a Trustee. The Trustee holds that property for the trust beneficiaries. The beneficiary of a trust can be an individual, an entity (such as a charity or political organization), or even the family pet. A trust must have at least one beneficiary but may have an unlimited number of beneficiaries. A trust may have both current and future beneficiaries.
All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts. If the trust is a revocable living trust, as the name implies, the Settlor may modify or terminate the trust at any time. An irrevocable living trust, however, cannot be modified or revoked by the Settlor at any time nor for any reason once active.
Reasons to Include a Living Trust in Your Estate Plan
A living trust might serve a number of important purposes in your estate plan; however, three of the most common reasons to include one in your plan include:
- Avoiding probate. After your death, your estate would normally be required to go through the legal process known as probate. Probate serves a number of functions, including identifying, valuing, and distributing assets, notifying creditors and paying debts, and calculating and paying gift and estate taxes. Probate is also when any litigation related to your estate will take place. Probate can be very costly, both in terms of time and money. For this reason, probate avoidance is a popular estate planning goal. A living trust can help your estate avoid probate because assets held in a trust are non-probate assets, meaning they do not have to go through the probate process before being distributed.
- Incapacity planning. Planning for the possibility of your own incapacity is just as important as planning for the end of your life. Prior to reaching retirement age, you stand a one in five chance of suffering a period of disability lasting five months or longer. Your odds of becoming incapacitated increase significantly every year thereafter. If incapacity does strike, someone must make decisions for you and take over control of your assets and finances. A revocable living trust is an excellent incapacity planning tool because it allows you to appoint yourself as the Trustee of a trust and someone you trust to take over control of your assets and finances as your Successor Trustee. If incapacity does strike, your Successor Trustee takes over control of the trust assets without the need for a court to approve or intervene.
- Protecting a minor child’s inheritance. If you have minor children, providing for them in the event that something happens to you is likely at the top of your estate planning goals. Many parents use a living trust to protect the inheritance they wish to leave their child because a minor child cannot inherit directly from the parent’s estate. A living trust can protect the assets meant for your children while also offering you the ability to stagger the inheritance you leave your children.
Contact a Londonderry Living Trusts Attorney
For more information, please join us for one of our upcoming FREE seminars. If you have additional questions about how a living trust might fit into your estate plan, contact a Londonderry living trusts attorney at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
If you create a revocable living trust you can easily make changes. An irrevocable living trust can typically only be changed by agreement of the beneficiaries or by court order.
Often, parents with minor children create a testamentary trust because it won’t be needed while they are alive.
COnsult with your attorney before making this decision. Often, appointing a professional Trustee is the better option.