About Living Trusts
One of the most common and most popular tools in today’s Estate Planning is the use of what is commonly known as a “Living Trust” or “Revocable Trust.” This type of trust has several advantages over a Will and can be used to address your Estate Planning needs efficiently and effectively.
Living Trusts will keep your assets from being subject to Probate. Probate is only necessary when a person dies owning assets titled solely in his or her own name. When that occurs, the only way to transfer title in that asset to another person is by court order. The person who obtains such an order is known as the executor or administrator for the Probate estate.
With a Living Trust that has been properly drafted and funded, the assets will escape Probate and can be transferred to your beneficiaries without the assistance of an executor or administrator. However, someone still must transfer title in the assets to the beneficiaries. That “someone” is called a “successor trustee.” The successor trustee is very similar to an executor or administrator for a Probate estate, except that the successor trustee is not required to administer the trust with court supervision. Rather, the successor trustee is provided with authority and broad powers to distribute the assets of the trust after your death. During your lifetime, you and your spouse may act as the sole trustees. Following your deaths, you can choose an individual or corporate trustee to serve in your stead and carry out your dispositive wishes.
In a Living Trust, you and your spouse never lose control over the assets you place in the trust. You, as the grantor or creator of the trust, can amend, revoke, or alter your trust at any time during your lifetime. This type of control allows you to freely use the assets of your trust free of interference from anyone.
Once you have decided to use a Living Trust in your estate plan, you should likely transfer all of your assets (with few exceptions) into the name of the trust so as to ensure that none of the assets would be subject to Probate upon your death. As mentioned above, the successor trustee will carry out the duties and responsibilities of the executor or administrator, such as filing tax returns, disbursing assets to the beneficiaries, paying creditor claims, inventorying assets, etc.
Living Trusts and Income Taxes
Living Trusts do not eliminate or reduce income taxes. This is so because you maintain complete dominion and control over the assets in your Living Trust and, thus, you are still considered the owner of the assets for income tax purposes. The income you earn on your Living Trust assets must be reported by you on your individual income tax return during your lifetime. The savings you realize by using a Living Trust include the avoidance of Probate expenses and fees, the avoidance of guardianship expenses and fees, and the reduction or elimination of federal estate taxes.
For help with estate planning and living trusts in Las Vegas, our office can help you.
