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Millikin University - Decatur, IL
Living Trusts 

Advantages and Disadvantages

A living trust is a legal document that enables you to leave instructions regarding the people you want to handle your final affairs and how you want your assets distributed after you die. A living trust looks a lot like a will. However, unlike wills, the disposition of a living trust does not go through probate. This provides privacy regarding the assets included in the living trust. It also prevents the court from controlling your assets if you are declared incompetent, and it gives you control over the assets you leave to your minor children and/or grandchildren.

A living trust can be revocable or irrevocable. Irrevocable trusts cannot be changed in any way, nor can the trustor remove assets that have been placed into the trust. When you establish or set up the trust, you are called the grantor (sometimes settlor or trustor). You will also name a trustee to manage the assets you place in the trust. Many people name themselves as trustee, continuing to handle their affairs as they would have without the trust. Married couples often establish themselves as co-trustees. In case one of the co-trustees becomes incapacitated or dies, the other instantly has control, without court involvement, of the assets in the trust.

A successor trustee needs to be named in case the trustee(s) can no longer administer the trust. This can be an individual or a corporate trustee (a bank).

Each type of living trust, revocable and irrevocable, has advantages and disadvantages.

Revocable Living Trust

Advantages

  • You see your trust work.
  • You avoid probate and the trust can also be used to avoid ancillary probate - that is, probate of property in another state.
  • You may save your estate a substantial amount of fees and costs.
  • You can provide for uninterrupted management in case of incapacity.
  • You can avoid interruption of management at death.
  • It's a good way to pass property to charity and save taxes at death.
  • You can change your mind.

Disadvantages

  • Property must be transferred, so there will be costs and energy expended in setting up the trust.
  • It slightly complicates subsequent dealings with the property.
  • It may require payment of an annual trustee's fee if someone besides yourself is trustee.
  • There may be fees at the time of termination.
  • There are no immediate tax advantages.

Irrevocable Living Trust

Advantages

  • You see your trust work.
  • You observe your trustee in action.
  • You avoid probate and court costs.
  • You probably will save your estate some fees.
  • It is a good way to pass property to charity.
  • You may save capital gains taxes on property placed in a charitable remainder trust.

Disadvantages

  • Property must be transferred, so there will be costs and energy expended in setting up the trust.
  • You lose all control over the property with most irrevocable trusts.
  • It requires annual fiduciary accounting and possible tax returns.
  • It may require payment of annual trustee fees.
  • There may be fees at the time of trust termination.
  • You can't change your mind and get the property back.

 

 

Please note, individual financial circumstances will vary. The information on this site does not constitute legal or tax advice. Donor stories and photographs are used with permission and are for purposes of illustration only. As with all tax and estate planning, please consult your attorney or estate specialist. All material is copyrighted and is for viewing purposes only. Use of this site signifies your agreement with the terms of the privacy statement. The content in this Planned Giving section has been developed for Millikin University by Future Focus. Please report any problems to webmaster.

 
 
Millikin University - Decatur, IL
Millikin University - Decatur, IL
 
Millikin University - Decatur, IL
Millikin University - Decatur, IL
Millikin University - Decatur, IL
Millikin University - Decatur, IL