In its most simple terms, a Living Trust is a legal set of instructions that details: (1) how you want your assets handled for you and your loved ones during your lifetime; and (2) how you want your ultimate estate to be distributed after your death.
A Living Trust is also known as a Revocable Trust, and as the name implies, enables you to alter, change, modify, or revoke it if your circumstances or estate planning goals change.
How do you know if a Living Trust might be right for you? A Living Trust may be the ideal estate planning tool for you if one or more of the below objectives are important to you:
(1) You want to maintain control.
With a Living Trust, you stay in control. You can transfer property into the trust and take it out, serve as the trustee, and be the beneficiary. You have full control.
You can select successor trustees to manage the trust if you become incapacitated and when you die. Many people like that with a Living Trust they, not the courts, select who’s in charge when they need help.
(2) You want to save your loved ones the hassle and cost of probate court, whether at your passing (death probate); or incapacity (living probate).
Probate is big business and can typically cost 3 – 5% of the total value of an estate. Additionally, probate offers no privacy. It also takes time and can hold up asset distribution to your loved ones for months or even years. For both death and living probate, the Court maintains control during the entire process.
(3) You want to reduce and/or eliminate estate taxes.
Estates of Massachusetts residents who pass away with an estate of $1M or more are required to file a Massachusetts Estate Tax return and may owe a significant tax. Given the high value of real estate in Massachusetts, life insurance policies and retirement assets, your estate can quickly add up to $1M or more. Planning to minimize/eliminate the Massachusetts Estate is tax is often important to many people.
(4) You want to protect inheritances for your children or grandchildren from the courts, creditors, spouses, divorce proceedings, and irresponsible spending.
A Living Trust allows you to control who receives your assets, how they receive your assets and when they receive assets. For example, you may want to stagger distributions to your children based upon reaching certain ages or reaching certain milestones. Or you may seek to limit distributions for asset protection if you know they are in a failing marriage or have an alcohol or drug addiction. Note: A Will allows only for outright lump-sum distributions once your child reaches age 18.
In addition, as Living Trust assets avoid probate, it makes it difficult for creditors to access assets since they must petition a court for an order to enable the creditor to get to the assets held in the trust.
(5) You have a blended family and want to provide for your new spouse without disinheriting children from your first marriage.
Since a surviving spouse has no legal obligation to support or provide an inheritance for the predeceased spouse’s children, you may unknowingly disinherit a natural child by leaving all of your assets to your new spouse. Also, if your surviving spouse is substantially younger than you, a majority of your child’s eventual inheritance could be depleted during the lifetime of the survivor, greatly reducing what amount, if any, is left for your child upon the death of the surviving spouse.
A Living Trust can address a blended family situation and give you peace of mind about what will happen to your assets when you are gone.
It’s important to work closely with your estate planning attorney to make certain that all of your assets are distributed according to your wishes – and done so with the least amount of cost and time delay. Living trusts allow you to avoid probate, minimize taxes, provide organization, maintain control, and provide for yourself and your loved ones. Contact Socius Law Firm today for more information about Living Trusts and let us help you decide what’s best for your situation.