Most people envision executing a Last Will and Testament when they think about estate planning because for most people a Will is the first estate planning document they include in their estate plan. To create a comprehensive estate plan, however, additional documents and tools will likely be incorporated into your plan. A living trust is one of the most popular of those tools. If you are unfamiliar with how a living trust works, the Kirkwood living trust attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC explain.
What Is a Trust?
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor (also referred to as a Maker or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. In fact, most people enter into small trust agreements on a daily basis without realizing it. Imagine for example that you ask your best friend to hold onto some jewelry that has been in your family for generations and give it to her daughter, your goddaughter, upon her wedding day or when she turns 25, whichever occurs first. You have created a trust wherein you are the Settlor, your best friend the Trustee, and your goddaughter the beneficiary of the trust.
Types of Trusts — Testamentary vs. Living Trusts, Revocable vs. Irrevocable
All trusts are first divided into one of two categories – testamentary or inter vivos – the latter of which is more commonly referred to as a living trust. A testamentary trust is a trust that arises upon the death of the Settlor and which is typically activated by a provision in the Settlor’s Will. A living trust is a trust that takes effect as soon as all the legalities of creation are in place.
Living trusts are further divided into revocable and irrevocable trusts. As the name implies, a revocable living trust is one that can be modified or revoked by the Settlor at any time and without the need to provide a reason. An irrevocable living trust, once it takes effect, cannot be modified or revoked by the Settlor for any reason. Typically, an irrevocable trust can only be changed or revoked by court order.
Testamentary trusts are all revocable because they do not even go into effect until the death of the Settlor at which point they are triggered by a Will that can always be changed prior to the death of the Settlor.
Common Reasons to Establish a Living Trust
A living trust can be used to help you accomplish a wide range of estate planning goals and objectives. Some of the most common of those include:
- Probate avoidance – because the assets held in a trust bypass the probate process, a living trust is often used in addition to a Will as a primary document for the distribution of estate assets. Because the assets held in a trust don’t go through probate they are readily available to beneficiaries after your death.
- Incapacity planning – a revocable living trust works as an incapacity planning tool by allowing you to name yourself as the Trustee and the individual you wish to take over control of your assets in the event of your incapacity as the successor Trustee. If you become incapacitated, the successor Trustee takes over management of trust assets automatically.
- Asset protection – assets you transfer into an irrevocable living trust are no longer part of your estate and, therefore, are protected from the reach of creditors or other threats to those assets.
The best way to decide how a living trust might fit into your estate plan is by consulting with your Missouri estate planning attorney.
Contact Kirkwood Living Trust Attorneys
If you have additional questions or concerns, please join us for an upcoming FREE seminar, or contact an experienced living trust attorney at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.
- How Tax and Non-Tax Considerations Impact Estate Planning – Part II - May 25, 2023
- How Tax and Non-Tax Considerations Impact Estate Planning – Part I - May 18, 2023
- The Joy in Joint Trusts - May 11, 2023