A Living Trust is a legal instrument like a will, which has instructions for what you want to happen to your assets at incapacity or death. Unlike a will, assets titled in the name of the living trust can avoid probate at your death, provide full control of your property, and keep the court from governing the management and use of your assets if you become incapacitated.
What Benefits Does a Living Trust Offer?
A living trust allows for probate avoidance at death, and prevents court control of assets during a period of incapacity. A living trust is a key component of a comprehensive plan for managing your assets and provides maximum privacy so that your private affairs do not become a matter of public record. A living trust can provide a quick, cheap transfer of assets if you were to pass away. Many living trusts designed to reduce, or even eliminate estate tax. A living trust is relatively inexpensive and easy to setup. It requires minimal maintenance, and can be modified or terminated at any time. Living trusts are much more difficult to contest than a standard last will and testament. A living trust can prevent court control of a minor’s inheritance. It can be written to protect the inheritance of special needs beneficiaries, and will ensure your assets go to your intended beneficiaries. Most importantly, the implementation of a well thought-out living trust will provide peace of mind.
Can I Have More Than One Living Trust?
You can have multiple trusts, with each trust serving a different purpose. For example, if you have a large estate, you might have a living trust for your marital assets, like your personal residence and bank accounts. It is important for individuals with large estates to have a trust that deals with estate tax issues. An Irrevocable Life Insurance Trust (“ILIT) is a common solution to estate tax exposure. An ILIT is funded with life insurance; the death benefit is intended to the estate tax, if due and payable. However, many ILITS are established as a precautionary measure. If no estate tax is due, the death benefit of life insurance owned by the ILIT, enlarges the legacy to have left to your loved ones.
For inheritances, many spouses will create a separate property trust to ensure family money stays in the family, and does not necessarily pass to their surviving spouse. The separate property trust would be in addition to a joint trust you and your spouse create for your marital assets. A living trust may become inadequate if an asset protection issue arises, such as a lawsuit, and you must now start asset protection planning with an irrevocable trust.
How Do You Advise Clients Who Are Apprehensive of Losing Control Over Their Assets in a Trust?
Putting you assets in a living trust does not mean you will lose control over the transferred assets. The ability to retain control is a key feature of nearly all living trusts. Other than the titling on bank accounts and real property, your ability to manage your assets does not change. As trustee of your trust, you will continue to buy and sell assets, make investment decisions, and control the use and enjoyment of your the assets. For most living trust, the tax identification number of your trust will be your social security number. As a result, you will not have to file a separate tax return.
Why Do I Have to Transfer Title of My Assets to My Living Trust?
Trust funding is a critical to the successful administration of a living trust. The trust governs the management of assets. If the trust does not contain property, it is a stack of worthless paper. After you have created your living trust, you need to change title on the real estate, stocks, bonds, CDs, bank accounts, investments, and insurance. Some estate plans do not require re-titling of all assets in the name of a living trust. You should meet with an estate-planning attorney to go over situation, and create an estate plan to deal with each asset. With the advice of your attorney, you will determine which assets to transfer to your living trust, and which will pass to your heirs via a beneficiary designation or directly to a joint owner.
Are Assets Held in a Living Trust Protected From Creditors?
An increasing number of states allow individuals to create self-settled trusts to keep assets out of reach of your creditors, like an irrevocable Tennessee Domestic Asset Protection Trust, or Investment Services Trust. Holding assets in carefully drafted irrevocable trusts will provide an additional layer of protection from creditors. Additionally, you can have spendthrift provisions in your domestic asset protection trust to provide a further layer of asset protection. A well-drafted spendthrift provision will protect trust assets from your beneficiary’s unwise financial decisions, and from their creditors. The level and quality of protection varies widely from state to state. You should establish your irrevocable trust in a state with the most advantageous governing law. It is important to work with a knowledgeable asset protection attorney who understands and appreciates the nuances of Tennessee law and the asset protection tools available here in Tennessee.
Is a Will Just as Good as a Trust?
Contrary to what a lot of people believe, a will without a trust, is usually not going to be the best plan for you and your family primarily, mainly because a will does not avoid probate.
A will can contain wording to create a testamentary trust, say from estate taxes and care for minors. But because it is part of your will, it cannot go into effect until after you die and the will has to be probated. Any which way you set up the will, it is not going to revoke probate. It provides no protection of incapacity. A will must be validated by the probate court before it can be enforced. If we cannot find the original after someone has passed away, a lot of times there is a presumption that it was revoked and that can create other problems. A lot of this is because the will does not go into effect until after you pass away and so it provides no asset protection, especially if you become physically or mentally incapacitated.
The court can usually take control of your assets before you die and this is a concern millions of Americans have. That is why it is important to meet with an attorney and take a look at the trust as opposed to just a living will. With the revocable living trust, you can avoid the probate and keep control of your assets while you are living even if you become incapacitated. It provides for a quick, cheap transfer of wealth after you pass away.
For more information on Trusts In The State Of Tennessee, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (615) 628-7775 today.