Living Trusts (1272)

It can be confusing when terminology is similar. "Living Will" or "Living Trust" - what's the difference? A living will has to do with health care concerns, while a living trust is directed at your finances.

A living trust, a legal document, is a means of managing your assets during your lifetime and distributing them upon your death. A trustee holds, manages, and distributes your money or property and its income according to your plan through a legal arrangement that takes effect during your lifetime. Trustees can be banks, family members, friends, you, or a combination of these.

A living trust can be revocable or irrevocable; funded or unfunded; and it may be used in combination with your will. A revocable trust allows you to change any provision of the trust or even totally rescind it during your lifetime. An irrevocable trust cannot be changed.

A revocable living trust will not avoid nursing home costs, nor save any income, estate or other death taxes. Such a trust can provide property and financial management, avoid probate, and save time in distributing your property upon death, however.

The trust does not replace a will. If you don’t title assets into a trust when you set it up, it is referred to as being unfunded. The intent is that it will be used sometime in the future. However, a funded trust does have your assets in it, whether they include money, stocks or real estate.

What happens if you die and your assets are not titled in the name of the trust as you planned? It is possible to have your assets transferred into your trust via the use of a pour-over will. These assets will go through probate since they were not in the trust when you died.

A living trust can be time-consuming to create and manage. It can involve much paper work to transfer assets. About half of those with living trusts neglect to re-title property they intended to transfer. Often an experienced lawyer is necessary. Paying a trustee can cost from .75 to 2% annually of the asset value being managed.

On the other hand, a trust is harder to break than a will if you’re concerned about family feuds. It is also not part of the public record.

Beware of living trust scams that promise to solve all your tax, financial and probate problems. Marketing information about living trusts is often incomplete, inaccurate, or misleading. Be careful of “prepackaged” living trust plans. Although some are prepared and sold by competent professionals, many are not.

If you are interested in a living trust as a will substitute, see a competent attorney who concentrates his or her practice in trusts and estate planning. Spending a little more for a well-planned trust will save you money in the long run.

For more information on this subject, Please visit the College of Agricultural Sciences Publications Web site.

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