Whenever estate planning is the topic of conversation, the subject of living trusts almost inevitably become part of the conservation. The reason for this is simple — a living trust can help accomplish a very numerous, and diverse, list of estate planning goals. For you to decide if a living trust should be included in your estate plan, however, you need to know exactly what a living trust can do for you.
What Is a Living Trust
A living trust is one of two types of trusts, with the other being a testamentary trust. A trust is a fiduciary legal arrangement that allows a third party, referred to as a Trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. All trusts can be broadly divided into two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s (trust creator) 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 unless a court grants the right to revoke or modify the trust.
Estate Planning Goals for Which You Might Use a Living Trust
Trusts have evolved over the years to the point where there are now a variety of specialized living trusts that are geared toward achieving very specific estate planning goals. Nevertheless, the average person can still use a living trust to help achieve broader goals within an estate plan, such as:
- Avoiding probate. Probate avoidance is a popular goal found in many estate plans because probate is costly, both in terms of the time it takes and the money that is often spent probating an estate. Assets held in a trust, however, bypass probate entirely. Consequently, assets held in a living trust can be distributed to your loved ones as soon after your death as you wish. This allows your intended beneficiaries access to much-needed assets immediately instead of having to wait for the conclusion of the probate process which can take months, even years, to finish. It also ensures that the assets you left behind aren’t diminished by the expenses of probate.
- Staggering an inheritance. When you use your Will to gift assets, those gifts are distributed to the beneficiaries in one lump sum, which isn’t always ideal. Young beneficiaries, spendthrift beneficiaries, or those who have struggled with addiction in the past should not be handed a large sum of money. The risk of the inheritance being squandered is simply too great. Using a living trust to pass down an inheritance, however, provides the ability to stagger the distribution of that inheritance, thereby limiting the risk and protecting the assets you worked hard to acquire.
- Maintaining some control over assets. Undoubtedly, the idea of your hard-earned money being squandered or wasted likely doesn’t sit well with you. Unfortunately, however, once a gift is made in a Will it becomes the sole property of the beneficiary to do with as he/she pleases. A living trust though offers you the ability to use the trust terms to retain a certain degree of control over how the assets you gift can be used. For example, the trust terms you create can be used to ensure that the assets you gift can only be used for educational or medical expenses – or for any other purpose you choose.
- Keeping gifts private. If privacy matters to you, a living trust should be considered because the terms of a Will become a matter of public record when the Will is submitted for probate. If you prefer the terms of your estate plan to remain private, a trust is the better option as the terms of a trust do not, as a general rule, become public.
Contact Living Trust Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions about including a living trust in your estate plan, contact the New Hampshire living trust lawyers at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.