| Due to the recent
attention given to the Living Trust
in the popular media, I took a
somewhat skeptical look at the
strategy in another column.
The focus of that previous column
was to explain that the Living Trust
was not the perfect estate planning
tool for everyone. I attempted to
explain that there are certain times
when you wouldn't want to use a
Living Trust and other times when
alternative strategies would provide
the same benefits. In this column
we'll take a look at some of the
good reasons to consider the Living
Trust.
Perhaps the most significant
advantage of a Living Trust is
that it can be designed to manage
your assets for you in the event
you become disabled or
incapacitated. While other estate
planning tools, such as the
durable power of attorney, can be
used to provide wealth management
in the event of a disability, none
is more flexible than the Living
Trust. When used to provide money
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.
In this same vein, the Living
Trust can be used by those who
need current management of their
wealth even though they are in
perfect health. This would include
persons who have no experience
handling money and those who
simply lack the time to manage it.
For example, a widow who has just
received a significant inheritance
could create a Living Trust and
name a bank or a trusted advisor
as the trustee. The trustee would
then invest the assets for the
widow's benefit and generally
handle all of her 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 widow's funds.
Another reason to consider the
Living Trust is if you own real
estate in different states. For
example, if a Pennsylvania
resident also owns real estate in
Florida, then upon his death it
will be necessary to conduct
estate settlement proceedings in
both states. If, however, the
Florida real estate is transferred
to a Living Trust, the estate
administration in Florida can be
avoided.
Living Trusts are also suggested
if a Will contest appears likely.
While this is not often a major
issue, if there are reasons to
expect a challenge by disgruntled
heirs, then you should consider
the Living Trust as a substitute
for your Will. It is difficult to
successfully challenge either
document, however, the trust does
provide a slightly stiffer
barrier.
Like all other estate planning
strategies, the Living Trust
merits consideration. However, the
Living Trust is not the magic
remedy that its promoters would
have you believe. Determining
whether its the right choice in a
given case requires you to balance
its advantages and disadvantages
in light of the other choices
which may also help you achieve
your goals.
More about Living
Trusts >
< Previous Page
|
