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Should you have a Living Trust?

Sally M. Wagley, Esq., Levey & Wagley, P.A., Winthrop, Maine

Has it been suggested to you that you need a “Living Trust?” The benefits of the living trust have been heavily promoted. For some people, a living trust is just the ticket, but for others simpler documents such as a Will and a Durable Power of Attorney are less expensive and more appropriate. This article will help you think about whether a Living Trust is right for you.

What is a Living Trust? When you establish a Living Trust, you take all or most of your assets and put them into something called a Trust. You name yourself as a Trustee – the person in charge of the assets. As long as you are alive and of sound mind, you have control of your assets, just as if you had kept the assets in your own name. A Living Trust is like a company, with you as the boss. A lawyer prepares the document, which states who is in charge of the trust and gives directions as to what is to be done with the money and property in the trust. You continue to exercise control over the assets, as long as you are of sound mind.

Successor Trustee. If you become mentally incapacitated, a “Successor
Trustee” (a trusted family member, friend, bank or professional named by you) takes over the management of the assets in the trust. The Successor Trustee pays bills, takes care of real estate, and handles investments. He or she will do so according to the instructions you have given in the trust document. When you die, the Successor Trustee will distribute the assets according to your directions in the trust, much the way assets are distributed under a Will. In this way, it is possible to avoid the need for probate proceeding in order to have your property distributed among family, friends and charity.

Reasons to Have a Living Trust. People who decide to have a Living Trust often do so for the following reasons:

  1. The assets in the trust need not go through probate at death. The assets are distributed according to the directions in the Trust.
  2. A Living Trust keeps information private, about what is in a person’s estate and who inherits it. (Wills and most probate documents are public record.)
  3. In a Living Trust, a trusted person can be named to take care of your property in the event of incapacity, in accordance with instructions in the Trust document.
  4. For people with estates of more than $1 million (the threshold for payment of Maine estate tax in 2008), the Trust can include features which eliminate or reduce estate taxes.
  5. If you plan to leave money to a disabled child or relative, a Living Trust allows for ongoing management of that person’s funds by the trustee.

Fees. While there advantages to a Living Trust, preparing a Living Trust involves time and expense which may not be necessary, depending on your situation. The legal fees for establishing a Living Trust are generally $2000 or higher, compared to lower fees for the preparation of simpler documents. After preparing a Living Trust, it is necessary to transfer most of your property into your Trust, including real estate, accounts, investments, and valuable personal property. This involves changing names on deeds, titles and accounts. It means more time and expense, and may require obtaining approval from banks and lenders.

A Simple Will Can Accomplish Many of the Same Objectives as a Living Trust. Often a simple Will is adequate to make sure that property is distributed at your death, according to your wishes. While this requires filing papers in the Probate Court when you die, probate is usually reasonably simple and inexpensive, if your beneficiaries don’t argue about your estate. A Will can include the same tax-saving provisions as a Living Trust, and can provide for the care of a disabled relative through appointment of guardian and establishment of a testamentary trust.

Durable Power of Attorney. As noted above, an advantage of a Living Trust is the appointment of a Successor Trustee who can oversee your finances in the event you become incapacitated. However, an inexpensive Durable Power of Attorney may be adequate to ensure that a trustworthy person will take care of your money and property for you in the event of your incapacity.

Seek Legal Advice. Each person’s situation is different. A Living Trust may or may not be right for you. At Levey & Wagley, P.A., we are available to meet with you to discuss your unique situation and develop an estate plan which meets your needs.

(The information provided on this website is for informational and educational purposes only. This information should not be construed as rendering legal advice or offering an answer to a specific legal problem.)

 

Click on these links for more information:

Long Term Care Planning 2008
Do you need a Living Trust?
Grandparents Raising Grandchildren
Legal Help for Caregivers
Do You Need a Power of Attorney?
What is Probate?
Elder Law Links