What is a Living Trust? Do I Need a Trust?
If you are asking these questions, chances are someone you know has recently told you that you need a trust. Depending on who that someone is, they may be right. However, not every person or family needs a revocable living trust. While many people do benefit from the advanced planning structure a trust offers, that determination is always best left up to the client and their attorney. Before you can answer the "Do I Need a Trust?" question, take a look at this non-legal definition of a revocable living trust.
A Revocable Living Trust, or Living Trust, is a legal document that dictates how the property transferred to the trust will be managed. The trust is a distinct legal entity and once you transfer property into it, the trust becomes the owner of that property and the trust agreement outlines how the property will be managed. There are key players in the creation and management of the trust; namely, Trustor/Grantor, Trustee, and Beneficiaries. You can learn more about these terms here.
Now, we can consider the question... Do I need a Trust?
Below are the top five reasons past clients have decided to create a trust, perhaps these reasons will help guide you to your own answer.
A living trust affords some asset protection while the trustor (person making the trust) is living. Under Missouri law, a husband and wife who create a joint living trust may also create a Qualified Spousal Trust (“QST”). This type of trust provides a greater amount of protection for assets transferred into the trust. Keep tuned, we plan to have a full article dedicated to the QST in the near future.
Probate is a lengthy, and potentially costly, process by which a personal representative manages the estate of a deceased person. Assets held in a trust, or transferred to a trust through beneficiary designations, can avoid this process completely.
Control from the Grave
There are countless reasons why someone may want to control their estate after they die. Some of the more common ones involve in-laws, drug or alcohol problems, financial immaturity, or minor children.
Protecting Young Children
Most simple Wills allow minor beneficiaries to inherit at the age of 18 or 21. By contrast, in a living trust there are no legal limits on how long you can stretch out a beneficiary’s inheritance. Even though there are no legal limits, there may be some practical limits on how long a parent can stretch out their child's inheritance.
Security Against Disability
In most cases, the primary trustee of a living trust is the trustor. If the trustor later became incapacitated, unable, or unwilling to fulfill those duties, the successor trustee can step into his or her shoes and take over. Assuming proper funding of the trust; the secondary trustee would now have access to those assets and could care for the trustor. As the name implies, a grantor needs to "trust" his or her successor "trustees". For tips on how to select a trustee, click here.
If you are thinking about creating a Trust, but are still not sure if it is the best estate planning tool to accomplish your planning objectives, contact us for a complimentary consultation.