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Q: What is the difference between a Will and a Living Trust?   


If you die with a will, the will assist the court to determine your wishes regarding who will get your estate, however, your estate will have to go through a long and expensive process called probate before any of the assets are passed on to your loved ones.  The probate process can deplete 4-5 percent of your estate,

and keep all the assets tied up for a year or two before resolution.


A Living Trust, on the other hand, allows you to avoid the high costs and delays of probate proceedings. A Living Trust allows your assets to transfer relatively quickly, most of the time within weeks or months. Living trusts also allow privacy, whereas a will allows all of your personal information to become part of the public court records, accessible to anyone in the world. Living Trust also have much more flexibility and allow various beneficial estate planning tools to be used which can provide tax and asset protection, creditor protection and other benefits making them the preferred estate planning method in almost all cases.


Q:  What Is A Living Trust?


There are various types of Living Trusts, but a basic Living Trust is a tool which allows the transfer of your assets to your heirs without costly and protracted probate proceedings. A Living Trust is a legal entity that, upon your death, transfers designated assets outside of your probated estate. The assets are held in the name of a legal entity called the trust for the benefit of yourself (until you die or become incapacitated) and subsequently for your appointed beneficiaries, so those persons do not technically own them. Living trusts go into legal effect upon signing, when the Grantor is still alive. This distinguishes them from testamentary trusts, which become legally effective when the Grantor dies. Your trust can be "revocable" which allows you to make changes or even terminate it. One of the great benefits of a properly funded living trust is the fact that it will avoid probate and minimize the expenses and delays associated with settling your estate.


Q: What are the advantages of having a Living Trust?


Like a Will, a living trust is a legal document that provides for the management and distribution of your assets after you pass away. However, a living trust has certain advantages when compared to a will. For instance: 


  • Control -- A living trust allows for the management of your affairs during your lifetime and in case of incapacity, without the need for a guardianship or conservatorship process. 

  • Avoiding probate -- the probate process usually takes a minimum of 9-12 months, and often much longer, consumes a percentage of the assets and is public record. Trust administration is quick, inexpensive and completely private.

  • Creditor protection -- Upon death, your assets are transferred (not directly to your beneficiaries) to a trust(s) that will help to protect your beneficiaries from creditors and predators.

  • Estate tax reduction -- Your spouse is exempt from estate taxes (up to a marital exclusion amount). When your spouse dies, your children become beneficiaries of the remaining trust assets, eliminating or minimizing estate taxes.


In short, a well-thought out estate plan using a living trust can provide your loved ones with the ability to administer your estate privately, with more flexibility and in an efficient and low-cost manner.


Q: Will I lose control of my assets if I establish a Living Trust?


Absolutely not! During your lifetime when you are mentally competent, you have complete control over all your assets. You may engage in any transaction as the trustee of your Trust that you could before you had a living trust.  There are no changes in your income taxes. If you filed a 1040 before you had a trust, you continue to file a 1040 when you have a living trust. There are no new Tax Identification Numbers to obtain. The “revocable living trust” can be modified at any time or it can be completely revoked if you so desire. Upon your passing, the trust becomes irrevocable so that no one can change your testamentary wishes. For married couples, the surviving spouse still has total control over his or her share of assets after its transfer to the survivor's trust, and the trust becomes irrevocable only as to the deceased spouse's share.


Q: What assets remain outside of my trust?


Assets with beneficiary designations such as a life insurance policy or annuity payable directly to a named beneficiary should not be transferred to your Living Trust. Furthermore, money from IRAs, Keoghs, 401(k) accounts and most other retirement accounts transfer automatically, outside probate, to the persons named as beneficiaries, and ownership of these assets should not be transferred to your trust. Bank accounts that are set up as payable-on-death account (POD for short) or an "in trust for" account (a "Totten Trust") with a named beneficiary also pass to that beneficiary without having to be titled into your trust. However, when you do your estate planning, it is important to seek the counsel of an experienced attorney who is familiar with the intricate regulations of retirement accounts and can coordinate the appropriate beneficiary designations with your overall estate plan.


Q: Why do I need a Pour Over Will if I have a Living Trust?


Yes.  A Pour-Over Will is used to name a guardian for your minor children. In addition, it protects against intestacy in the event any of your assets have not been transferred into the trust at your death.  It will also invalidate any previous will that you may have executed. Its function is to "pour" any assets left out of the trust into it so they are ultimately distributed according to the terms of the trust.

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