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Estate Planning: Revocable/Living Trusts |
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The Bailey Law Firm is experienced in the creation, funding and administration of Living Trusts. |
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| What is a Revocable Grantor or Living Trust? |
| A Living Trust is a revocable, inter-vivos or lifetime trust agreement, which is established and signed by you as the Settlor, as the Trustee, and as the Beneficiary. A Living Trust is a substitute for a Last Will & Testament. |
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| What are the Benefits of a Living Trust? |
The benefits of a Living Trust are:
1. Avoiding the cost of probate.
2. Avoiding the time delay of probate.
3. Planning for future incapacity.
4. Keeping financial affairs private.
Probate, a court process by which your assets are transferred at your death to your heirs, has the following disadvantages:
1. The financial cost to your heirs.
2. The time delay during which your heirs have limited or no access to their inheritance.
The financial cost of probate ranges from 3 to 5 percent of the value of your assets. The time delay of probate ranges from four months (minimum in Tennessee) to 16 months (national average) after you die.
You can avoid probate on specific assets by the following methods:
1. Joint Tenancy with a right of survivorship;
2. Payable or Transfer on Death accounts (POD or TOD);
3. Beneficiary Designations.
However, Living Trusts are the most comprehansive method of avoiding probate. Living Trusts allow for all, not some, of your assets to pass outside of the probate process.
If you become disabled, then a friend or family member can manage your affairs with:
1. a Conservatorship,
2. a Durable Power of Attorney, or
3. a Living Trust.
A conservatorship, being a court process, has certain disadvantages:
1. Time consuming, resulting in a delay in implementation;
2. Costly, resulting in your payment of attorney's fees, bond premiums, and court costs; and
3. Public, resulting in the disclosure of your medical condition, assets, and income.
In contrast to a conservatorship, a power of attorney is much less costly. It can be implemented immediately and does not disclose your health and finances. However, a power of attorney has certain disadvantages, including: (a) no required accounting of funds spent by your attorney-in-fact; (b) revocable orally, i.e., revocation does not have to be in writing; (c) staleness - the older the power of attorney, the less likely it will be honored; and (d) a conservatorship can revoke a power of attorney.
Unlike a conservatorship and a power of attorney, the Living Trust offers you more options to plan for your future incapacity.
Probate Court files are open to the public. In other words, if your Last Will and Testament is admitted to probate, then anyone can walk into the courthouse and request a copy of your Will. For some people this is not a concern. For others, privacy is an important issue.
Living Trusts are private documents which are not filed with any court or clerk and are not made a part of any public record. The primary benefit of privacy is the lack of public knowledge of the names of your beneficiaries, the terms of the distribution of your estate, and the type and amount of your assets and liabilities. |
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| Why Doesn't Everyone Have a Living Trust? |
Everyone does not have a Living Trust because:
(a) Not everyone is educated about the benefits of a Living Trust;
(b) A Living Trust, when compared to a Will, costs more money NOW to save your heirs even more money when you die; and
(c) A Living Trust requires a greater investment of time NOW to save your heirs even more time when you die. |
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| What Basic Documents Comprise a Trust? |
Your Living Trust should consist of the following basic documents:
1. Living Trust Agreement;
2. Certificate, Memorandum or "summary" of your Living Trust;
3. Pour-Over or "backup" Last Will and Testament;
4. Various Transfer Documents such as deeds and letters of instruction necessary to re-title your assets in the name of the Living Trust.
Your Living Trust package should also include:
1. Durable General or Financial Power of Attorney;
2. Durable Health Care Power of Attorney; and
3. A Living Will or Life Support Advance Directive. |
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