Estate planning vs living trust

You will be the “trustee” of your living trust which means that during your lifetime, you will have complete control over the living trust’s assets. Avoidance of Probate The main estate planning vs living trust for a living trust is the avoidance of probate.

Probate is a state court proceeding in which your property is transferred to your heirs. Since probate only affects assets which you own at the time of your death, assets placed in a living trust are not owned by you, therefore, there is no probate on those assets. Confidentiality and Continuity of Ownership Since probate is a court proceeding, your Will and the valuation of your assets are open to public inspection. A living trust, however, is confidential and the transfer of assets from the living trust is kept from public view. When the grantor of a living trust dies or becomes incapacitated, the successor trustee continues the administration of the living trust. Advantages to a Will A Will only takes effect upon the death of the person, therefore, nothing has to be transferred or administered currently.

Also, the probate estate is a separate taxpayer which can select a fiscal year end — an advantage over a living trust. Disadvantages of a Living Trust All assets which are to be owned by the living trust must be transferred currently into the living trust. In addition, the trustee must title and sign all documents relating to the living trust as “John Doe, Trustee, John Doe Revocable Trust dated January 1, 1989”, instead of merely signing his or her name. All purchases and sales must be conducted in the name of the living trust. Third parties who are used to dealing with an individual often have a difficult time dealing with the trustee of a living trust.

Often they will insist that the living trust agreement be provided or that their attorneys review the living trust, at the living trust’s expense, before they will transact business with the trustee. To summarize, the transfer of assets to the living trust must be carefully and properly documented, and dealing with third parties tends to be difficult. The living trust, because of the transfer of documents and its operation as a viable entity during the grantor’s lifetime, make it more expensive to draft and implement than a Will. Conclusion Initially a living trust has greater costs with respect to its formation and implementation than a Will, but those costs are usually a small percentage of the amount saved through the avoidance of probate costs at the time the grantor dies. Additionally, if confidentiality and continuity of ownership are important objectives, then the living trust is the document of choice.

Irrevocable Life Insurance Trust An irrevocable life insurance trust is an ideal vehicle in which to place a life insurance policy. In this manner, the life insurance proceeds do not become part of the decedent’s estate for estate tax purposes. The annual life insurance premiums are paid by the grantor contributing the necessary funds to the trust and the trustee then pays the premiums. 1,000,000 life insurance policy on the life of the grantor.