Q&A WITH KENDALL W. KING
Different kinds of trusts may be needed based on family and financial situations
Q: What is a living trust? A: A living trust is a legal document that holds assets for your benefit during your lifetime, and helps you plan ahead on your assets that are passed on after your death. Assets transferred to a living trust are no longer considered a part of your estate, and the assets will pass to your heirs in the manner laid out in the governing trust documents without the need of a court’s intervention. Typically, living trusts are revocable, which means you retain control of the assets in the trust and can modify it at any time during your lifetime. Another type is the irrevocable living trust, where the assets transferred in the trust are no longer yours. Once the trust agreement for an irrevocable living trust is made, the named beneficiaries are basically set in stone and changes can’t be made without the consent of the beneficiaries. An irrevocable trust can be a powerful tool to reduce a wealthy family’s future tax burden since the appreciated value of the transferred assets won’t be included in the estate.
Q: What are the benefits of a revocable trust?
A: The most attractive benefit of a revocable trust is that it simplifies the estate planning process. If you pass away without a trust, your estate will go through a probate court, which is time-consuming, expensive and public information. A living trust, on the other hand — does not go through probate, providing privacy and is often means a faster distribution of assets to your heirs. Trusts also can help ensure your wealth stays within your family after your death and protects heirs from creditors or exspouses invading their inheritance.
Q: Do I need a trust?
A: A trust can be a useful estate planning tool, but it really depends on your family and financial situation. If you’re concerned about how all your assets are going to be distributed after death, or how much tax your heirs will have to pay, you might want to spend the extra money to have a trust. Younger people, married or single, with simple estate plans with no children or significant assets probably don’t need a living trust, but they should consider it later in life as their family grows and wealth increases.
Q: Where do I go to get a trust? How much will it cost? A: I recommend that you consult an estate attorney if you want to set up a trust. There are so many state and federal laws to take into account, so it’s important to enlist the services of an expert that specializes in this field. The right lawyer can guide you through the various types of trusts and help you decide what best suits your assets and goals — while helping make sure it’s legally sound. A basic trust plan for a married couple generally costs anywhere from $2,500 to $4,000 if you go to an estate planning expert, while a more complex trust likely will cost more. Your estate plan should generally include a revocable living trust, a will, an advanced directive (also known as a living will) and a health care proxy. If you’re married, you likely will need only one family trust, but both spouses need their own wills, advanced directives and health care proxies.