Estate Planning Living Trust - - Raleigh, NC Attorneys

Living Trusts

Revocable or Simple Living Trust

The Simple Living Trust is revocable. The person creating the trust (called the Grantor) initially transfers ownership of his or her assets to the trust.

For example, a husband and wife may re-title their house so that the house that was titled to Robert Smith and Jean Smith (husband and wife) is now titled to The Smith Family Trust.

The trust document gives the Grantor complete control over everything, including the right to alter or terminate the trust at anytime, during the Grantor's life.

This means that The Smith Family Trust is completely controlled by Robert and Jean Smith. They have the power to sell, rent or lease the house, take out second mortgage or home equity loan, and are personally responsible for all debt on the property.

If there is only one Grantor, the simple living trust becomes irrevocable at his/her death and functions much like a Will. If the Grantor has been serving as his/her own Trustee (the person administering the trust who makes decisions and manages finances), it is it is important that there is an alternate Trustee named in the trust document so that there is someone in place to settle the estate and distribute property when they die.

The assets are distributed by the Trustee as directed by the trust, bypassing Probate Court. Along with the trust, it is advisable to also have a specially drafted Will which compliments the trust. These Wills are sometimes called "pour-over" Wills, because at the Grantor's death they "pour-over" any assets that have not already been transferred into the trust or have been acquired the Grantor's name after the living trust was created. A Will is also still necessary to name a guardian for minor children.

In the common case of a married couple with children, upon the death of the first spouse, the trust can be written to remain revocable. Usually, the survivor stays in control as the sole Trustee. It is also important to have an alternate Trustee already in place when the second parent dies. Otherwise, your heirs will have to go to court to have a Trustee appointed.

Perhaps the most significant advantage of a living trust is that it can be designed to manage assets in the event a person becomes disabled or incapacitated. While other estate planning tools, such as the Durable Power of Attorney, can be used to provide asset management in the event of a disability, none is more flexible than the living trust. When used to provide asset management in the event of a disability, the trust is created today, but your assets are not transferred to the trust unless and until you become disabled.

A Living Trust can also be used by those who need current management of their wealth, even when they are competent and healthy. This would include people who have little or no experience handling money and those who would rather allow someone else handle their finances. For example, a widow who has just received a large inheritance could create a living trust and name a bank or a trusted financial planner as the Trustee. The Trustee would then invest the inheritance for the widow's benefit and handle financial affairs. One important aspect of such an arrangement is that the trustee is governed by certain well-settled legal principles which require the trustee to exercise a high degree of care in managing the trust funds. Failure to do so can result in criminal prosecution.

Another reason to consider the living trust is in cases where the Grantor owns real estate in different states. For example, if you live in and own property in North Carolina and also own property in Maryland, then upon your death it will be necessary to conduct estate settlement proceedings in both states. If, however, the Maryland real estate is transferred to a living trust, in that case the estate administration in Maryland can be avoided.

Living trusts are also suggested if a Will is likely to be contested. While generally uncommon, if an individual believes there may be challenge from heirs, using a living trust as a substitute for, on in conjunction with, his or her Will may be the best option for those wishing to protect their estate. It is difficult to successfully challenge either document; however, the trust requires a higher standard to refute.

There are statutory guidelines for how trusts can be created and a number of technical requirements that must be fulfilled. For proper estate planning and wealth preservation, consult an attorney at Haas McNeil & Associates, P.A. to ensure compliance with current tax laws and maximum tax savings for you and your loved ones.