Today we will continue to explore the living trust advantages and benefits. Part 1 of this post discussed such benefits as avoiding the probate proceedings, minimizing the emotional stress on the family, preventing conservatorship, and preserving privacy.
In addition, the living trust advantages include the following:
Centralized Management. The assets transferred to a living trust are all under one “roof” which provides for centralized management.
Protection of Dependents. Because a revocable living trust sets forth the terms for the distribution of your property and assets, you can choose to continue to keep the property in the trust even after your death to provide an ongoing source of funds for young children or dependents with special needs.
Reduce or Eliminate Estate Taxes. Although a living trust does not eliminate or reduce estate taxes in itself it can be constructed and funded in a way to ensure full use of the marital deduction and applicable credit for estate tax purposes.
Easy to Set Up and Maintain. Setting up a revocable living trust is relatively easy and usually involves only a one-time charge. Once the trust is set up and funded, it requires very little maintenance. Usually, you would only need to see an attorney if you desire to change the terms of the document (for example, disinherit someone, change the trustee, etc.)
Avoids the problems of joint ownership. Joint ownership will only avoid the probate process at the passing of the first joint owner (the asset will be subject to probate upon the second owner passes away) and will result in the loss of one spouse’s applicable credit amount. Also, if the joint owners pass away in a common disaster or accident such that it is impossible to determine which joint owner died first, two probate estates will need to be started (one for each owner). Lastly, joint ownership between a parent and child could result in gift tax liability and subject the asset to the claims of the child’s creditors. All of these problems are avoided by having a revocable living trust.
Effective prenuptial protection. If the trust is established before the marriage, the property placed in the trust will remain there and stay separate from the property accumulated during marriage.
Difficult to Contest. The procedure for contesting a trust is much more difficult than contesting a will. The complexity of the procedure may dissuade the angry beneficiary from challenging the terms of your trust.
Clearly, the living trust advantages are significant, and should be considered when designing every estate plan.
In the next post, we will discuss how does the living trust work, who are the parties, and what happens after the revocable trust is executed.
To be continued.