• 31
  • March
    2011

In the last post, we discussed the basics of the importance of a will, and touched on another foundational estate planning tool, the living trust. Today we will go into some more detail on living trusts.

One of the advantages of using a living trust is that you can transfer assets to your heirs or to charity without going through probate. Probate is a court-supervised legal process intended to make sure a deceased person's assets are properly distributed. One reason people try to avoid probate is that the process generally involves more legal fees and red tape. Another is that if your estate goes through probate, your financial affairs become public information.

With the help of a Florida living trust attorney, you can establish your living trust and then transfer legal ownership of certain assets, such as your home, stocks and other investments, your antique furniture, or even special collections, to the trust.

You name a trustee to control the trust's assets after you die, and you specify which beneficiaries will get which assets from the trust. You can name a family member as the trustee, or use a financial institution or an attorney.

A living trust is revocable, meaning you can change its terms at any time, or even dissolve it, as long as you are alive and legally competent.

Since you still control the assets while you are alive, the IRS considers income from trust assets to be income for you, for tax purposes.

Here are some additional tips regarding wills and trusts:

  • It is a good idea for spouses to have separate wills and living trusts, because you never know which spouse will die first.
  • Make sure the beneficiary designations on your retirement accounts and life insurance policies are consistent with your wishes as expressed in your will and/or trust.
  • If you co-own real estate, the co-owner will become the sole owner when you die, regardless of any contrary wish expressed in your will.
  • If you don't actually transfer ownership of your assets to your living trust, then the assets will not pass to your heirs outside of probate. Don't forget to follow through and transfer the actual ownership.
  • Finances and families change; update your estate plan regularly.

Source: Wall Street Journal Smart Money "Why Most People Need an Estate Plan" 3/22/2011