What Is A Living Trust?
A living trust is a trust which is funded with assets and which can be amended and revoked by the person creating the trust. The person that creates the living trust is called the "settlor". The terms of the living trust are created in a written document signed by the settlor and the trustee of the trust. A living trust is typically used by people to handle their financial affairs while alive and dispose of their property after death. Many people consider living trusts as an alternative to probate court.
Will I Save Estate Taxes With A Living Trust Compared To A Will?
No. Avoiding probate does not mean you are avoiding taxes, rather you are avoiding the process of probate. A living trust is one method of limiting the estate taxes due after death, however the savings that may be available to you are not limited to just those people with living trusts. In other words, the laws that allow for savings on certain portions of an estate tax are available to anyone, regardless of whether they have a living trust or not. (Example, a properly prepared will results in the same savings.) Therefore, when someone suggests that a living trust is the only way to save on certain estate taxes, they are not accurate.
Why Is Everyone Trying To Sell Me A Living Trust?
Financial planners, insurance agents, and even some lawyers, have decided to cash in on the phrase "avoiding probate court". Using the word "avoid" implies that going through probate court is always expensive, time consuming and a hardship. Unfortunately, that is not true. The financial planners and insurance agents selling these living trusts are in it to make money and avoid the consequences of their actions by reminding the public that they are not a lawyer, therefore they are not giving you legal advice. Unfortunately, most members of the public will not seek a legal opinion which is what the financial planner and insurance agent is counting on. As a result, they end up "buying" a living trust based upon improper or inaccurate information. Living trusts can be a very useful tool for some individuals, however, only lawyer are qualified to explain all the advantages and disadvantages to the public.
So, What Are The Advantages Of A Living Trust?
A living trust will afford to some people greater privacy, lower court costs and attorney fees, lower appraisal fees and lower executor fees ( as compared with trustee fees ). Additionally, a living trust will speed the process of transferring all your assets and reduce the probability of litigation among your heirs.
So, What Are The Disadvantages To A Living Trust?
Living trusts are very expensive to create as compared to the cost of a typical will. In essence, you are hiring a lawyer to transfer all the same assets that probate court would transfer upon your death into the living trust while you are alive. Additionally, there may be annual expenses for a living trust that are not present when you have a will. ( Example: if you select a trustee other than yourself, the trust will probably have to pay him/her an annual or monthly fee.) And a living trust, unlike a will, is a lifetime effort. For the remainder of your life, your trustee (even if the trustee is yourself), must manage and maintain the living trust. And finally, there are some minor tax advantages to using a will rather that a living trust ( Example: An estate is entitled to an exemption of $ 600.00 per year whereas a living trust is only entitled to an exemption of $ 300.00 per year.)
Will Placing My Assets In A Living Trust Protect Them From Medicaid Rules?
Will A Living Trust Save Me Income Taxes?
Is There More Information Concerning Living Trusts In These Webpages?
Yes. Just click on the word "probate".
What Should I Do?
Never buy a living trust from a financial planner or insurance agent. If you are interested in learning more, please contact Guiley & Guiley to schedule an appointment.