Are Living Trusts Necessary?

By Beverly Bird

Estate planning is a highly personal matter – the finer details of your life come into play perhaps more than in any other area. Luckily, you can create a plan tailored to your own unique needs. Whether those needs require a living trust generally comes down to the nature and extent of the property you own, but a few other issues factor in as well.

How a Living Trust Works

There are two kinds of living trusts – an irrevocable trust requires that you relinquish control and ownership of your assets, but a revocable trust does not. You appoint someone else to act as trustee of an irrevocable trust, but you would generally act as the trustee of a revocable trust yourself. You can also be a beneficiary of your revocable trust during your lifetime, taking back any income that its assets generate, but this type of arrangement is rare with an irrevocable trust. Both types involve funding the trust by transferring ownership of your assets into it -- otherwise, they're just empty vessels, serving no purpose. When you create the trust, you write its terms, much as you would if you wrote a will. You can dictate who you want to receive your property and – unlike with a will – you can decide when they will receive it.

Complicated Estates

If your children are grown or you have no children at all, you don't own extensive or exotic property, or you want your spouse to inherit most of what you own, a living trust probably isn't necessary. If you own real property in another state, however, and you dispose of it by will, your estate would have to deal with two separate probate proceedings – one in the jurisdiction where you die and another in the state where the property is located. A living trust avoids probate proceedings. If some of your heirs are less than responsible with money, a trust could benefit you because they would not be receiving their inheritances all at once – you can minimize the chance that they'll squander your estate by directing that your trustee pay them small amounts periodically rather than give them windfalls. If one of your heirs has special needs, a trust can provide for this, whereas leaving money in a will can affect eligibility for need-based government assistance.

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Likelihood of Incapacitation

Another consideration is the state of your health. If it's poor, or you think there's any chance that you might become incapacitated at some point for any reason, a living trust becomes more necessary. If you create an irrevocable trust, you've already named someone else as trustee to oversee it. If you create a revocable trust, you can name a successor trustee to take over if you're no longer able or willing to run the trust yourself or when you die. Without a trust, the court would have to appoint a conservator to take care of your personal business if you become incapacitated. Depending on your condition, you may not have a voice in who this person is. With a trust, you can appoint anyone you feel comfortable with, and the court generally can't override your decision.

Need for Privacy

Wills are matters of public record. Anyone at all can access a copy after your death. They would know who you left your property to and how much you had to leave. If this bothers you, you might want to create a trust instead. Typically, only your beneficiaries and trustee are entitled to copies of your trust documents. If you're a high profile individual, even if just in your own locality, you might want to opt for a trust instead.

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The Different Types of Revocable Living Trusts
 

References

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Blind Trust Vs. Revocable Trust

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