Should You Include a Living Trust in Your Estate Plan?

How can you determine whether you should include a living trust in your estate plan? The only way to know for certain is to talk with an experienced estate planning attorney. But before you talk with your lawyer, you can learn how a living trust works and what benefits one provides. Our respected estate planning lawyers at BRMM answer those questions in the discussion that follows.

One important point to remember is that you should never create a living trust (or any other estate plan document) by filling out a form or using an online service. Taking that approach can have disastrous consequences for you and your family. Instead, you should rely on an experienced estate planning lawyer to help you create an estate plan that suits you, your unique personal and financial circumstances and goals, and your goals for your family’s future.

How Does a Revocable Living Trust Work?

A living trust is also often referred to as a revocable living trust. That’s because most often a living trust can be revoked (terminated) or changed at any time by the grantor or settlor (the term for the person creating it). Some other types of trusts are irrevocable, so the distinction is important.

A living trust is one made during the grantor’s lifetime. A living trust also may be called an inter vivos trust. Like any type of trust, a grantor creates a living trust by executing a written legal document that establishes the trust. The document specifies all the terms that apply to management of the trust and distribution of the assets.

A living trust names a trustee to administer the trust, as well as a beneficiary to receive the distributions. The trustee has a fiduciary duty to manage the trust for the benefit of the beneficiary.

One unique aspect of a living trust is that during the grantor’s lifetime, the grantor usually is both the trustee and beneficiary. There also may be other beneficiaries. Typically, when the grantor of a living trust passes away, the trust becomes irrevocable. A successor trustee named by the grantor then manages and distributes the trust property as specified by the grantor in the trust.

What Are the Benefits of a Living Trust?

A living trust offers a number of benefits for the grantor both during life and following death. The trust provides financial management of assets as soon as it is created and funded. It also is an important tool to manage assets in the event of incapacity. In some situations, a living trust is a better option than a financial durable power of attorney in that regard.

After the grantor’s death, the trust controls distribution of estate assets to the beneficiaries. A living trust eliminates the need for probate of an estate, which saves costs and time. The beneficiaries receive more assets — and they receive them sooner — than they would if the estate went through probate. By avoiding probate, the trust also maintains the privacy of the financial details of the estate, an aspect which is important to many individuals and families.

In some circumstances, a living trust can help avoid federal estate taxes as well. That also can mean that beneficiaries receive more assets from the estate.

Properly drafted, a living trust can protect the grantor’s loved ones from disability, waste (from irresponsible spending), and creditors. Because a living trust can be changed by the grantor at any time, the trust provides flexibility in estate planning, including in the event of incapacity of the grantor and other beneficiaries.

A Living Trust Is Not an Estate Plan

Sometimes people think that a living trust is a complete estate plan. That is not the case at all. Just as a will is not an estate plan, a living trust isn’t either. The trust is only one part of your estate plan. In most cases, you also need a will to ensure that all your property ends up in the trust on your death. If you own property that is not included in the trust, that property may be required to go through probate.

Creating a complete, prudent estate plan requires assistance from an experienced, knowledgeable estate planning attorney. An estate plan includes different documents that serve different purposes. A living trust is not a substitute for an estate plan, although it may offer considerable advantages as part of a thorough plan.

Our experienced BRMM estate planning attorneys welcome your inquiry about adding a living trust to your estate plan. You also may read these additional articles for more information about living trusts:

Talk With Our Experienced Troy, Michigan Estate Planning Attorneys

At the law firm of Barron, Rosenberg, Mayoras & Mayoras, P.C., we provide a full range of services relating to estate planning, including living trusts. We’ve been serving clients in Oakland County and beyond for more than 40 years. Our clients count on our commitment, experience, and credentials when they turn to us for their legal needs.

Call us today at (248) 494-4577 or use our online form to talk with our experienced estate and probate attorneys.

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