Estate Planning with Living Trusts
What is a Living Trust?
Firstly, A living trust does not replace a will.
A living trust is a written legal document that holds title to assets that are disbursed or owned by the trust for a time certain based on the trust terms. A trustee oversees the trust and is compelled to manage the trust based on the terms contained in the trust document. Below are the common key fiduciaries named in a living trust:
- The Grantor is the person who creates the trust.
- The Trustee(s) is often the same as the grantor for revocable trusts. The document will also appoint successor trustees.
- The Beneficiary is the person who will inherit or receive the assets in the trust at some designated time period. Typically, the death of the grantor or owner.
Important Note: Living trusts do not appoint a Guardian for your minor children. You appoint those in your will.
What is the difference between Revocable and Irrevocable Living Trusts?
Revocable means that the grantor can modify the trust at any time, and any assets owned by the trust can be taken out and title changed at any time. Irrevocable means that the grantor cannot modify the trust, once the grantor gives assets to the living trust they cannot be taken out.
Important note: A revocable trust will become irrevocable once the grantor dies because the grantor is no longer available to make changes to it.
How is a Living Trust typically used?
A living trust is typically used to:
- Keep the assets in the trust out of the probate process. Locally, probate can be a different process in different states. In Georgia, probate is a quick, easy, and inexpensive process. Meanwhile in South Carolina, probate is typically a longer and more difficult process. A living trust can be used to avoid probate if assets are titled correctly in the trust. This also provides privacy as to the ownership of the assets since the assets do not have to be probated. Probate is a public process.
Important Note: an asset is not owned by the trust until it is titled as such. Any item not owned by a living trust will not escape the probate process.
- Plan for mental disability or incapacity. The assets held in the trust can be managed by a successor trustee when and if the grantor becomes incapacitated.
- Remove the value of property from a person’s estate for estate tax avoidance, for asset protection, or for elder care planning. Irrevocable living trusts will help with this.
Before attempting to form a living trust, you should contact appropriate legal counsel. As always, our advisors are happy to talk with you if you have any questions. Feel free to call us at (706) 364-4281.