An Overview About Living Trusts: What Everyone Needs to Know
By: Jillian A. Centanni, Esq.
Living trusts are an estate planning tool and an important piece of your estate planning toolbox. Below are important concepts that everyone needs to know about living trusts.
1) What is a living trust? A living trust, sometimes called an “inter vivos” or “revocable” trust, is a written legal document that allows an individual to place assets into a trust during his/her lifetime. The individual can use the assets, but the assets are owned by the trust. The living trust designates a trustee who is responsible for managing and protecting the assets in the trust. When the individual dies, the assets in the trust are distributed to the people the individual designates as his/her beneficiaries.
2) What is a trustee and what are a trustee’s responsibilities? The trustee is the legal owner of trust assets. A trustee is responsible for managing the trust’s assets, tax filings for the trust, and distributing assets according to the terms of the trust.
3) How is a living trust different than a will? A living trust is designed to function during your life and after death. A will is a written legal document with a plan of distribution of assets upon death. The executor/executrix oversees the process and nothing in a will takes effect until after death.
4) Does a living trust avoid probate? One of the benefits of a living trust is that it avoids probate. Avoiding probate also means that the costs and the delay that are associated with probate are also avoided. A will may take months to be probated, but a living trust can be distributed within weeks after death. The assets in a living trust can also have distributions delayed until later dates, such as a particular age of the beneficiary.
5) Can a living trust be altered at any time? A living trust is not an irrevocable trust and can be altered at any time. A living trust can also be dissolved.
6) Does a living trust become part of the public record? A living trust does not become part of the public record because it was not probated. Living trusts are private.
7) Can all assets go into a living trust? Most assets can be placed in a living trust. Life insurance and certain retirement accounts cannot be placed in a living trust.
8) What are some negatives to having a living trust? As mentioned above, not all assets can be put into a living trust. Also, a living trust can only control the assets that are transferred into it. Assets that are not part of the living trust will be passed through state intestacy laws. Additionally, the living trust document will cost money to be prepared and ensure that the trust is managed.
9) Should I have a will in addition to a living trust? It is common to have both a living trust and a will. The will, often called a pour-over will, directs assets that were left out of the trust, to the extent those assets can be placed into the trust, to be placed into the trust. The pour-over will ensures that all assets can be protected.
10) What happens if you having a living trust and become ill or incapacitated? With a living trust, if you become ill or incapacitated the trustee can automatically jump into the driver’s seat and manage the affairs without court intervention. Additionally, since a living trust is revocable, if incapacity is disputed, one can retain control on his/her own. With a will, a durable power of attorney is needed. If there is a durable power of attorney, the court will not need to appoint another (e.g., a conservator) to manage the financial affairs. However, if there is not a durable power of attorney, the Court will appoint another to oversee the financial affairs.
Contact The J. A. Centanni Law Firm. P.C. at 908-753-0153 to help with your estate planning needs. Jillian A. Centanni, Esq. is the Owner and Founding Member of The J. A. Centanni Law Firm, P.C. Ms. Centanni has a B.S.E. in chemical engineering, an M.B.A. and a J.D. She was recently named to the Super Lawyers® – Rising Star list, a designation given to the top 2.5% of Attorneys licensed in New Jersey who have been practicing law for less than 10 years or are under the age of 40. She is also a Registered Patent Attorney.
Disclaimer: The information contained in this article is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem.