Living Trusts: Three Considerations to Make

When considering different estate planning options, you’ve probably come across the idea of living trusts.  A living trust doesn’t replace a will; it’s a supplement to it that allows you to transfer the ownership of certain assets to a trust when you’re still alive.  When the living trust is revocable, you can revoke the trust or change its terms whenever you like, keeping control over the assets; when it’s irrevocable, you’re giving away the assets, and your control over them, permanently.

When determining whether or not you need a living trust, what are some issues to consider?

Estate complexity.  If your estate is larger and relatively complex, consisting of greater amounts of money and various properties and assets, you may derive benefits from using a living trust.  The assets in a living trust will by-pass the probate process; probate, in the case of an unusually complex estate, could be more time-consuming.  For example, if you own property outside of Texas, it would need to go through probate in that state; to avoid a multi-state probate process, you may want to place that property in a living trust.  Because probate in Texas itself is relatively straightforward and simple in the majority of cases, property ownership in another state is one of the few reasons to establish a living trust if your main purpose is to avoid probate.  There are also other ways to sidestep probate, so you may not even need a living trust.

Avoiding estate taxes.  There are many people who mistakenly believe that a living trust will automatically allow them to avoid federal estate taxes or give them other tax advantages.  This isn’t the case.  There are certain living trusts that give you tax advantages or exempt portions of your estate from taxation (such as when your relinquish them irrevocably before your death), but there also other ways to benefit from tax savings without establishing a living trust.  You may not even need to be concerned about the federal estate tax, which is why it’s important to discuss tax advantages with an experienced and reputable attorney.

Issues of incapacitation.  You may be concerned that at some point you’ll be incapacitated and unable to oversee your financial affairs.  In that case, a living trust is one possible way to have someone else help manage your assets according to the terms you set.

A living trust should never be something you rush to establish, as they may turn out to be an unnecessary expense and inappropriate for your situation.  Discussing the options with an expert probate attorney is essential; they’ll review the considerations you need to make, including your age and health, marital status and familial relationships, and the complexity of your estate.  To determine whether or not you’d benefit from a living trust, contact Ford + Bergner LLP to discuss your situation and decide on the options that maximize the advantages to you and your beneficiaries.