By: Martin M. Shenkman, CPA, MBA, JD
See also "revocable living trust". Most trusts that are revocable (can be changed, modified or rescinded), are created during the grantor (the person who establishes the trust, also called trustor or settlor) lifetime (in legal jargon, inter-vivos). These are also referred to as "living trusts" and "loving trusts". Too often these trusts are boilerplate sold to consumers on the basis that they help avoid the purported evils and costs of probate. For example, if you own a vacation home, second home, or other investment real estate in a state other than the state in which you live (domicile), having a living trust own that property will avoid ancillary probate in that other state. While probate avoidance is a reasonable goal, in many jurisdictions it is not a significant difficult, cost or time delay. For example, a limited liability company may be a better option to own that real estate investment then a living trust as it can provide protection of your home and other assets from a lawsuit against that property. A living trust does not (yet many websites and even attorneys routinely recommend living trusts as the only answer is such situations). However, a well done living trust can be tailored to address a range of important issues, consider the following: o Living trusts can be used, and usually are, with a "pour over will". This is a will that distributes, or pours over into, the living trust, any probate assets that are governed by the will. However, this is too simplistic an approach as in many circumstances a pour over will can defeat some of the key benefits of a living trust. Creativity, not standardization, is often what is needed to make your plan best fit your needs (not the form you buy on a website). o Living trusts can be used solely to hold gifted or inherited assets to provide greater assurance that they won't be commingled and thus tainted as marital assets subject to equitable distribution in a divorce. o Living trusts can be used to hold a single asset, such as a family vacation home, to provide a structure for its use and assure the desired eventual disposition. o Living trusts can be carefully tailored to address illness, disability or chronic illness. For example, someone living with a chronic illness that is typified by on again, off again, attacks, can use a living trust with a current active co trustee to facilitate asset management during those attacks. o Someone suffering from a debilitating illness such as Parkinson's disease, ALS, or Huntington's Disease can use a living trust to organize and provide for the management of their asset current, tailor or modify the trust as they desire to "fine tune" it for the future time when they won't be able to manage assets. Living trusts are powerful and useful estate, financial and personal planning tools when they are given the care and attention necessary.
Subscribe to our email list to receive information on consumer webcasts and blogs, for practical legal information in simple English, delivered to your inbox. For more professional driven information, please visit Shenkman Law to subscribe.