Michigan Probate Attorneys Andrew Thav and Jamie Ryke are asked thousands of very good questions regarding estate planning and living trusts each year. Part of our job as probate lawyers is to give you the best advice possible. We found this article to be very helpful because it gives our estate planning clients some helpful guidance when it comes to asking the right questions about living trusts.
Living trusts are often portrayed as the ultimate estate planning tool and something everyone needs. The truth is a living trust may not solve all your problems, but may be one piece of your estate planning toolbox. To find out what’s right for you, ask your attorney the following questions.
A living trust is a document that allows you to place assets into a trust during your lifetime. You continue to use the assets but they are owned in the name of the trust. You name a trustee who is responsible for managing and protecting the assets in the trust. After your death, the assets in the trust are distributed to the people you choose as your beneficiaries.
What Property Can Go in a Living Trust?
Most of your property can be placed into your living trust, but some items such as life insurance and certain retirement accounts are not eligible. The more property you place in the trust, the more beneficial the trust will be.
Who Should Be My Trustee?
Most people name themselves as trustee, so that they can manage the trust assets during their lifetime. You can choose anyone or even a corporation as your trustee if you prefer. If you name yourself, you will need to name a successor trustee who can step up to manage the trust after your death.
Does a Living Trust Avoid Estate and Probate Taxes?
A revocable trust (one that can be altered during your lifetime) does not avoid estate taxes that are applied by your state or the federal government. A special kind of living trust called an AB trust passes assets directly from one spouse to another and avoids estate tax. Living trusts do not pass through probate and so your estate will not need to pay any probate fees or costs.
What Are the Benefits of a Living Trust?
Living trusts offer a variety of benefits, which is why they have become so popular. Living trusts allow your estate to avoid probate. By doing so you avoid the costs associated with having a will probated, but you also avoid the delay associated with probate. It can take months for a last will to be probated, but when you create a living trust, the assets in the trust can be distributed soon after your death. You can also choose to delay distribution to later dates. Some people set distributions for their beneficiaries’ big birthdays, for example. Another benefit of a living trust is that because it is not an irrevocable trust, you can alter it at any time. You can even decide to dissolve the trust if you so choose. A living trust is also private. Since it is not probated, it never becomes public record.
What are the Drawbacks of a Living Trust?
Living trusts cannot include all of your assets since some are not eligible to be owned by a trust. The other problem with a living trust is it can only control the assets you specifically transfer into it, so if you forget to change ownership of something like a bank account, it won’t be covered by the trust. If you rely solely on trust for your estate planning, the assets that are left out of your trust will pass via your state intestacy laws. The living trust cost can also be seen as a drawback. You need to pay upfront to have the document prepared and make sure the trust is being managed. These costs may be more than those involved in having a will drawn up and probating a small estate.
Do I Still Need a Power of Attorney?
Living trusts have all of your assets already placed in the ownership and management of a trust, so that should you become incapacitated, they are already being handled for you. Most attorneys do recommend you also draw up a power of attorney which will authorize someone else to make legal and financial decisions on your behalf so that there is no question you have someone to handle decisions should you be unable to do so.
What is the difference between a Living Trust vs. Will?
A living trust provides for management and ownership of only the assets you specifically place into it. A trust is designed to function during your life and after your death. A will provides for the distribution of all of your assets upon your death. It only provides instructions for what will happen to your assets after you die.
How Do I Create a Living Trust?
To create a living trust, you need to obtain living trust forms for your state. Complete the forms and sign them in front of a notary, being sure to name a trustee and create the terms for your trust. The trust is not functional until you transfer ownership of assets into it.
Should I Also Have a Will?
Most attorneys agree that if you create a living trust, you should also have a will. This will, sometimes called a pour-over will, is your insurance. In case there are any assets left out of your trust, the will directs that those assets be placed into the trust. In this way, all of your assets can be protected.
Living trusts provide a lot of flexibility and privacy and can be an important part of your estate plan. Considering all the options available to you can help you make the best choice.
Contact the Michigan Probate Attorneys, Jamie Ryke and Andrew Thav, about your estate planning and probate needs.