A recent nj.com article, “Living Trusts explained,” says that you should think of a living trust as a contract between the current “you” and the future “you.” Practically speaking, it can also duplicate and/or replace the provisions of your durable power of attorney and even your will. This is how a living trust addresses three major concerns:
- Real estate in another state. Laws are different in each state, so estates may be treated differently. There are some states that include all owners of property within their state in their tax laws. When the real estate owner is a trust, those rules don’t apply. You also avoid a potential battle with another state about your residency and property ownership.
- Meddling relatives.All trust documents are private, so family meddlers won’t have access to your affairs. The people you designate will know who’ll be managing your finances and who gets what when you pass away.
- Health issues of one or both partners/spouses. If you know that some conditions "run in the family" or are concerned about dementia as you age, a living trust can detail all of your wishes. It can also make provisions for carrying out your wishes in the event you’re unable to manage your affairs. Your designated successor trustee will immediately step in to support you and take over.
A living trust is revocable, so at any point you can change your mind and change any provision … or get rid of the whole thing. However, when you die, the living trust becomes irrevocable and directs the disposition of your estate. You’ll still need a will, but that includes language referring to the living trust for instructions and details.
Make sure you have the trust document prepared by an experienced estate-planning attorney who specializes in this area. If you decide that a living trust is right for you and have the document prepared by an attorney, you may want to change the title of your accounts and assets from you to the name of the trust, or name your trust as a beneficiary of your accounts, make sure to discuss these options with your attorney or financial planner to find what will work best for you. A living trust can provide comfort and reduce stress for your family.
Reference: nj.com (November 13, 2016) “Living Trusts explained”