Comprehensive estate planning can accomplish a number of different goals and objectives beyond simply deciding who will receive which estate assets when you die. In order to achieve those goals and objectives, however, you will likely need to incorporate additional estate planning tools and strategies into your estate plan in addition to your Last Will and Testament. One of the most popular additions to a comprehensive estate plan is a living trust. Only your Missouri estate planning attorney can help you decide if a living trust is right for your estate plan; however, it may be beneficial for you to know what one is and how a living trust might benefit your plan.
What Is a Trust?
At its most basic, a trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries.
Elements of a Trust
Although there are numerous types of specialty trusts, all trusts require the same basic elements for creation, including:
- Settlor – the Settlor, also referred to as the “Maker”, or “Trustor,” of a living trust is the person who creates the trust.
- Trustee – the Trustee is the person, or company, that is responsible for administering the trust terms and distributing the trust assets pursuant to those terms.
- Beneficiary – every trust must have at least one beneficiary, though a trust may have many beneficiaries. A beneficiary can be an individual, an organization, or even the family pet.
- Trust terms – the Maker of a trust establishes the terms of the trust. As the Maker, you may include almost any terms you wish as long as they are not illegal or unconscionable.
- Funding – a trust must have sufficient funding to accomplish the trust purpose. Funding may include almost any type of assets, including cash, securities, or real property.
Testamentary vs. Living Trusts
Trusts all fall into one of two categories – testamentary and inter vivos (living) trusts. A testamentary trust is one that does not become active until the death of the Settlor. A testamentary trust might be used, therefore, by the parent of a minor child who wants the child’s inheritance to be protected until the child can inherit the assets directly. A living trust, on the other hand, becomes effective the moment all of the requirements for completion are present and the trust is sufficiently funded.
Revocable vs. Irrevocable Living Trusts
Living trusts are further sub-divided into revocable and irrevocable living trusts. A revocable living trust can be modified or revoked by the Maker at any time and for any reason – or for no reason at all. An irrevocable living trust cannot be modified or revoked by the Maker once it becomes active. Modifying or revoking an irrevocable living trust can usually only be done with court approval, and then only for a very good reason.
Revocable vs. Irrevocable Living Trusts
Living trusts can be further divided into revocable and irrevocable living trusts. Because it does not activate until the death of the Settlor, a testamentary trust is always a revocable trust until it takes effect at which time it becomes an irrevocable trust. Living trusts, on the other hand, can be revocable or irrevocable at the time of their creation. A revocable living trust is one that can be modified, amended, or revoked at any time, and for any reason, by the Settlor of the trust. An irrevocable living trust cannot be modified, amended, or revoked by anyone by a judge and then only for good cause.
Uses for Your Living Trust
Once upon a time, trusts were used almost exclusively by wealthy families as a way to pass down the family wealth. Now, living trusts are commonly found in the estate plan of the average person and used to accomplish a wide range of estate planning goals and objectives, including:
- Incapacity planning
- Probate avoidance
- Asset protection
- Special needs planning
- Medicaid planning
- Pet planning
- Tax avoidance
If you have additional questions or concerns about trusts contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLCby calling (314) 966-8077 to schedule an appointment.