There are a number of reasons to consider establishing a revocable living trust. The primary reason is to maintain control over your estate at your death or in the case you become disabled. It allows you to leave your assets to whom you want, when you want, how you want, and in the most tax efficient manner. It will also help you avoid probate. One way to look at a trust is to consider it like starting a company. You create an company (the trust) and everything is owned by the company. It avoids probate because there are no assets left at death. They are distributed in the prescribed manner set forth in the document and there are no assets for the court to probate. It takes your assets out of the jurisdiction of the court. It also gives you greater control over your assets in the case of disability. It avoids having to hire an attorney and a conservator appointed by the court to act as your guardian.
How do you determine if a living trust is for you? As stated above, control is the primary factor. One of the other points to consider is cost. You might not need a trust if the cost of setting up and maintaining the trust is more than the cost of probate. Additionally it depends on how much of the work you are willing to do in maintaining the trust, because anytime you sell or replace an asset it has to be retitled. Many administrators will provide you with the forms necessary to identify all of your assets and get them reassigned to the trust, but if you don’t want to do the leg work in going to title companies and financial institutions they will do it for you but at a charge. You can name yourself or another family member as the trustee, but just remember there should be a regular time (perhaps annually) that you look at your assets and make sure the trust structure is in proper order.
In closing, there are a number of factors to determine if a living trust is for you. The main consideration is control over your assets. Additionally, it saves time and money upon your death by avoiding probate. But a living trust is a legal contract on paper and if properly constructed can be a complicated one that might be better done by a professional. The people who tell you that you can attend a one-day seminar and create your own living trust might not really have your best interests at heart, instead only concerned with selling you something. As with anything discussed on this web site, consult a qualified professional if you have any questions. A living trust is a higher order of advance directive. Make sure you have the basic advance directives covered first, your will and if you desire, a living will or medical power of attorney. These are discussed more fully in another section.
There is such a thing as an irrevocable living trust and that is usually associated with life insurance policies, called an Irrevocable life Insurance Trust (ILIT). It is primarily concerned with purchasing second to die insurance and if you need further information contact a qualified tax professional.
