When planning for your retirement and passing on your estate to the next generation, it’s important that you understand not just the planning process but the impact of your plans in the future. For seniors with significant assets, a surviving spouse, or family to support even after they pass on, a will may not be the ideal document to rely on. In our previous article, we talked about the various ways that a will can become a problem for your family. You might be no longer able to change your estate plans. This may also include probate delays, legal fees, contesting the will, and the fact that all wills become public records. Maybe you’d rather ensure that your estate passes on smoothly without probate or publicity. In that case, a living trust may be a far better option for you and your family.
Building A Living Trust
When people think of a trust, we imagine the fabulously wealthy creating a lifetime safety net for their privileged offspring. Or building a structure to protect assets from personal taxes. But trusts can be for everyone, especially if you have built a few assets. (Assets may include a house, vehicles, and substantial personal and retirement savings.) While there are many types of trust that can be put together, a living trust is a special revocable trust. It was designed specifically to fix the problems inherent with a traditional will.
“Inter Vivos” / Revocable Trust
The first thing that differentiates a living trust from other kinds of trust is that a living trust is revocable or “inter vivos” depending on the terminology you’re using. A revocable trust can be altered or dissolved based on the wishes of you, the grantor. This means that during your lifetime, you can always close or reinvent the structure, rules, or assets of the trust.
Easy to Pass On Inheritance
The beauty of a living trust is that it serves as a bridge across the void that is probate. Where normally your estate would fall into the temporary possession of the court, the living trust is a container that is not so profoundly affected by the death of you the primary trustee. Instead, it smoothly transitions to the possession of your successor trustee. (Or joint-trustee, in the case of married couples with a joint living trust.) The bank accounts, assets, and property that your family might be denied access to or control over during a probate period.
Rules of the Trust
Some may be apprehensive that with a living trust, their final wishes not concerning property wouldn’t be honored. In fact, a trust is even more strict than a will on making sure certain less concrete requirements are met. Rather than writing the terms of your will, the living trust is made of rules that can constitute your final wishes. If, for instance, you want to leave your house to your daughter but only if she takes your 3 cats, or for flowers to be delivered to your surviving spouse every year on your anniversary, the trust can take care of this.
Power of Attorney
An interesting benefit of a living trust is the ability to set your inheritor trustee as your power of attorney. They can have specific access to your estate and assets. Should you fall deeply ill or become incapacitated, your trust and trustee will be able to step in and make sure that no court-appointed conservator that you wouldn’t approve of can take control. This is another very useful aspect for people with close but not dear relations who might try to meddle. And because the trust is revocable, it is remarkably easy to take control back from your inheritor trustee should you recover.
Living Trusts and Retirement Funds
The final benefit of a living trust is the fact that you can use them to direct the benefits of your retirement accounts when there are remaining funds at the time of your death. This is usually done by naming the trust as the contingent beneficiary. This can help ensure that the money from your retirement accounts can also be bequeathed according to your wishes.
For more information and guidance planning your retirement and estate please contact us today. Here at Dungan and LeFevre, we’re always ready to help clients build the right plans for you and your family.