USING A LIVING TRUST

• Most people understand the importance of a will, but many are not familiar with trusts. Both a will and a trust can be used to transfer your property when you die, but the similarity ends there. A will has no effect until you die, while a living trust becomes operative during your lifetime to manage your assets. While a will is part of the public record a trust is not, thus providing greater privacy. Trusts are usually easier to amend than wills and less likely to be contested by your heirs.

• You can use a living trust to make decisions about your old age care. The trust can specify your preference for care by your family or in a nursing home. If you become disabled or incompetent, your trust will control who will care for you and how your money will be managed. Without a living trust, a court might need to appoint a guardian if you become incapacitated. As with probate, guardianship proceedings can become costly and time consuming. A living trust provides a way to avoid legal proceedings to appoint a guardian.

• A living trust may also help you in a variety of other circumstances. For example, you can use a management feature of living trusts to appoint a professional trustee for the elderly, for inexperienced persons who have recently inherited wealth, and for minors. Living trusts are also useful for those lacking time to manage their property, such as busy professionals and those who travel a great deal. If you own real estate in more than one state, a living trust can help avoid probate in each state. Probate in multiple states increases the cost and time to distribute your property to your heirs.

CREATING A LIVING TRUST

• Our office can prepare a living trust agreement that appoints a trustee to manage your property for your beneficiaries. To maintain control, you can be your own trustee. Commonly, the person creating the living trust is the first beneficiary while other provisions transfer the property to his or her heirs upon death. The trust agreement will provide details on your rights to change the trust, the duties of the trustee, how to distribute your property, how to provide for your family, and when and how to select a successor trustee.

• You can cancel or change any of the provisions of your trust document, including the beneficiaries, the property they are to receive, and the trustee. You should review your trust every year to assure that it still meets your needs. Mr. Silverblatt can advise you about the legal and tax effects of your proposed changes and prepare a document that will accomplish those changes.

CHOOSING A TRUSTEE

• As noted above, you can serve as your own trustee or you can appoint a professional trustee such as a bank or trust company. Most people appoint an individual such as their spouse, a relative, a friend, their lawyer or other advisor to serve as successor trustee. When deciding whom to select as trustees, you should consider whether they are worthy of your trust and are willing to accept the job. A professional may be the best choice if your property will be difficult to manage or distribute.

• The trust document will describe the duties of the trustee to manage the trust property, keep records, prepare tax returns, and make distributions to the beneficiaries. The trust document can also designate a successor trustee or provide instructions on low to select the successor.

TRANSFERRING YOUR PROPERTY INTO A TRUST

• After creating your trust, you must complete the formality of transferring your property to the trust. For example, instruct your broker to transfer your stocks and bonds into the name of the trust. Tell your insurance agent to assign your life insurance policies to the trust. Deeds transferring your real estate should be prepared and recorded in every county where you own real estate. This office can assist you every step of the way.

NEED FOR A WILL

• A will is still needed to appoint a guardian for your minor or disabled children. A will is also needed for assets that you acquire after the creation of the trust or may have neglected to transfer to your trust. The will should have a "pour-over" provision to transfer your property to the trust when you die. Such a "pour-over" provision will cause your property to be distributed according to the terms of your trust.

TAX IMPLICATIONS

• For income tax purposes, the trust property is treated as if you remained the owner. You will report income from the trust on your federal income tax return until your death. However, the creation and funding of a living trust does not have any federal gift tax consequences. A trust can be used to avoid estate taxes. Our office can help you to design a trust that provides the most favorable tax treatment for your heirs.

CONCLUSION

• Living trusts have many advantages in estate planning. Unlike wills, living trusts do not require lengthy and costly probate proceedings. Your property and heirs will not be listed in public records in a courthouse. And your property can be transferred to your heirs almost immediately after your death. The advantage of the living trust must be weighed against the expense and effort of creating and administering the trust.

• Ask our attorneys whether a living trust is the right estate planning tool for you. We can carefully draft a trust document to meet your needs and objectives and help you to reduce estate taxes for yourself and your heirs. We can also help you prepare other estate planning documents, such as a will, a durable power of attorney, and a medical power of attorney.