Do I Need a Living Trust?
By Katie D. Whitman, JD, Landmark Bank, Texoma LIVING WELL Magazine
You’ve probably thought about what will happen to your loved ones when you pass away, but have you really thought about the details of how your money will be distributed? What about your house, your car, or your favorite antique dresser? Do you worry that one of your children won’t be able to handle an inheritance? Do you worry that asking a close friend or loved one to manage your estate will place an unfair burden on them? We often avoid dealing with these types of details out of fear, complacency, or just because it’s overwhelming. A revocable or living trust is a very effective estate planning device that can provide answers to these questions and give you piece of mind.
Living or revocable trusts can have many different provisions and purposes, but are most often used as a will substitute, as a way to avoid probate at your death, and as a way for you to leave specific provisions for the distribution of your estate or for the care of those you are leaving behind. A living trust is not only useful for the wealthy—it can be useful for anyone who wishes to ensure that their estate is managed according to their wishes.
The trust is a separate legal entity that you, or you and your spouse, control during your lifetime. You designate the assets you wish to transfer to your trust (real property, personal property, securities, or cash deposits) and those assets are managed by a trustee for the ultimate benefit of whomever you choose to designate. During your lifetime you are most often the trustee of the trust and have complete control of the assets. You can make changes to the trust, add or remove assets, or even terminate the trust. However, when you, or you and your spouse, have died, the trust becomes irrevocable and effectively cannot be changed. You choose who will be the successor trustee(s)—the person or entity that will take over management of the trust and assets at your death. That person can be a relative, a friend, a bank or trust company, or any combination thereof. One of the main purposes of the trust document is that it tells the successor trustee how to manage or distribute your assets after you die, making the selection of your successor trustee(s) a very important decision.
The trust document will also express the duration of the trust. Should the assets be held in trust until your minor children reach a certain age, until a child marries, or only as long as it takes to settle your estate and distribute your assets? A living trust can also be the genesis of more than one irrevocable trust. It can generate a trust for each child, for separate charities, or into more complicated trusts used for tax planning and wealth management.
Key benefits of living trusts include:
- Providing for minor children or family members who are inexperienced or unable to handle financial matters
- Providing for management of personal assets should one become incapacitated
- Avoiding probate and/or immediately transferring assets to beneficiaries upon death
- Reducing or avoiding estate taxes
- Ensuring privacy—probate is public while a trust is held private
One unique aspect of a trust is that the trustee owes a fiduciary duty to the beneficiaries of the trust. That duty is a legal and ethical obligation of loyalty and care—meaning that the trustee must put the interests of the beneficiaries above their own. The trustee is the legal owner of the assets in the trust, while the beneficiaries are the beneficial owners of the assets. It can be complicated, but when drafted properly the trust document will clearly express the relationships, the obligations, and the specific directions that you wish to be followed.
Author Katie is an assistant vice president and trust officer with Landmark Bank, Investment Management and Trust, in Columbia, Missouri.
For more information about estate planning and trust administration, please contact us at Landmark Bank, Investment Management and Trust, at 903-892-1800. For specific information about forming a trust, be sure to consult with a licensed attorney experienced with trust and estate planning.
