Some people hear the word “trust” and equate it with complex. This isn’t always the case. Think instead of a living trust as a contact between your current self and your future self, advises nj.com in “Living Trusts explained.” A living trust is totally private, can serve to duplicate and/or replace certain provisions of your durable power of attorney and in some instances, your will. Living trusts can be used to address three main concerns:
- Real estate in another state. Laws are different in each state, so estates may be treated differently. There are some states that include all owners of property within their state in their tax laws. When the real estate owner is a trust, those rules don’t apply. You also avoid a potential battle with another state about your residency and property ownership.
- Meddling relatives. All trust documents are private, so family meddlers won’t have access to your affairs. Only the people you designate will know who’ll be managing your finances and who gets what when you pass away.
- Health issues of one or both partners/spouses. If you know that some conditions "run in the family" or are concerned about dementia as you age, a living trust can detail all of your wishes. It can also make provisions for carrying out your wishes in the event you’re unable to manage your affairs. Your designated successor trustee will immediately step in to support you and take over.
A living trust is revocable, so at any point you can change your mind and change any provision … or get rid of the whole thing. However, when you die, the living trust becomes irrevocable and directs the disposition of your estate. You’ll still need a will, but that includes language referring to the living trust for instructions and details.
If you are interested in having a living trust or any type of trust created, be sure to work with an experienced estate planning attorney. Bear in mind that there will be details that you’ll have to handle, especially changing the title of ownership on your accounts and assets from your own name to the name of the living trust. Key point: the living trust is only going to be effective if it owns accounts and assets, so this is an extremely important step. Done properly, a living trust can provide you and your family with privacy, and the comfort of knowing that the correct planning is in place.
Reference: nj.com (November 13, 2016) “Living Trusts explained”