Using a Living Trust as Part of Estate Planning

A living trust is a useful component of estate planning. It is designed to manage and protect assets during a person’s lifetime and to ensure a smooth transfer of those assets after death. Understanding the intricacies of a living trust, its advantages, and its interaction with a will is essential for anyone looking to establish a comprehensive estate plan.

A living trust, a type of revocable trust, is a legal document created during an individual’s lifetime. It is designed to hold and manage the individual’s assets, such as real estate, bank accounts, investments, and personal property. The person who creates the trust, known as the grantor, appoints a trustee to manage the assets according to the terms of the trust. Often, the grantor serves as the initial trustee, retaining control over the assets while alive. Upon the grantor’s death or incapacitation, a successor trustee takes over to manage or distribute the assets as specified in the trust document.

To establish a living trust, the grantor must:

1. Draft the trust document — This document outlines the terms of the trust, including the beneficiaries who will receive the assets and the conditions under which they will receive them.
2. Transfer assets to the trust — The grantor must retitle their assets in the name of the trust. This process, known as funding the trust, ensures that the assets are governed by the terms of the trust.
3. Manage the trust — As long as the grantor is alive and capable, they manage the trust assets, enjoying the benefits of those assets just as they did before.

There are several advantages to using a living trust in estate planning:

1. Avoiding probate — One of the primary advantages of a living trust is that it allows assets to bypass the probate process, which can be time-consuming, costly, and public. Assets held in a living trust can be distributed to beneficiaries without court intervention.
2. Continuity of management — In the event of the grantor’s incapacitation, a successor trustee can seamlessly take over management of the trust assets, ensuring that the grantor’s affairs are handled without court involvement.
3. Privacy — Unlike a will, which becomes a public record after death, a living trust remains private. This confidentiality can protect the privacy of the grantor and beneficiaries.
4. Flexibility — A living trust can be amended or revoked at any time during the grantor’s lifetime, providing flexibility to adapt to changes in circumstances or intentions.

Despite the advantages of a living trust, it is still essential to have a will. A will serves several important functions:

1. Property not included in the trust — Any assets not transferred to the living trust will need to go through probate. A will ensures these assets are distributed according to the grantor’s wishes.
2. Pour-over will — A pour-over will that directs any assets not already included in the living trust at the time of the grantor’s death to be transferred (or “poured over”) into the trust. This ensures that all assets are eventually governed by the terms of the trust, even if they were not formally transferred during the grantor’s lifetime.
3. Guardianship — A will is necessary to name guardians for minor children, as this cannot be accomplished through a living trust.

An experienced estate planning attorney can orchestrate the use of a living trust, a will and other documents to carry out your objectives most effectively.

At Schnipper, Britton & Stobaugh in Hot Springs, our attorneys assist Arkansas residents with comprehensive estate planning. Call us at 501-762-0887 or contact us online to set up a free initial consultation.