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LIVING TRUST is a revocable trust established by a grantor during his or her lifetime in which the grantor transfers some or all of his or her property into the trust. Like a Will, a revocable living trust can provide for the orderly disposition of the property it controls. However, unlike a Will, which will automatically control all assets personally owned by the testator, a trust will control only those assets which have been placed into the trust by the party creating it (the creator of a trust is known as the settlor, trustor or grantor of the trust). The process of placing assets into a trust is known as funding the trust, and is one of the most important aspects of completing an estate plan making use of a trust. Like a Will, a revocable living trust can include provisions designed to save a wide variety of taxes. While a Will provides minimally better opportunities for income tax planning, it is fair to say that both Wills and revocable living trusts allow for the same sort of overall tax planning. Advantages and disadvantages:The primary advantages of the revocable living trust are the cost, extraordinary fees, and time of the probate process. no automatic fees are payable as a result of administering a trust after the death of the settlor, although trustee's fees are traditionally based upon the gross value of trust assets. If sales of assets, tax work or litigation are involved, professional fees will ordinarily be incurred. There are no mandatory filing fees or publication expenses during trust administration, although it is quite common to incur appraiser's fees to establish asset values for various tax purposes. Revocable living trusts are not suitable documents for nominating guardians for one's minor children. However; such disadvantage can be overcome by including a will nominating the guardian in the trust. The Will in this case ordinarily be known as a pour-over Will. A revocable living trust is and can be easily amended by settlor by executing a document known as a trust amendment. As the name implies, a revocable living trust can also be completely revoked at any time during the settlor's lifetime. Living trust usually more expensive to establish than a Will; however, all fees paid during the administration process are tax deductible. The affairs of a simple living trust can be ordinarily handled in considerably shorter time than what would be required for the simplest probate proceeding. It is important to state here that trusts offer no estate tax advantages over Wills, the gross estate for estate tax purposes has no direct correlation with the gross estate for probate or trust purposes. Where the IRS chooses to audit the estate tax return, it could take years to finalize the decedent's affairs regardless of whether a Will or a revocable living trust has been employed. Another advantage of a revocable living trust which is its ability to help avoid the need for a conservatorship. While the use of a trust cannot guarantee that a conservatorship will be avoided, it should be an important consideration. Conservatorship proceedings can become quite expensive, and they are often demeaning to the person being placed under conservatorship. Where a Will is used, a similar result can be achieved through the proper use of durable powers of attorney. Another advantage often attributed to revocable living trusts is that they are private and do not involve any court proceedings. Finally, one should consider that a trust only works when it is properly funded and administered during one's lifetime. This takes only a little bit of effort, but many of us are not willing to devote even the minimal amount of time necessary to make a trust function properly. While a planned-for probate proceeding may not be the perfect way to administer a decedent's estate, it is certainly better than a probate proceeding which is required because the decedent failed to properly administer his or her revocable living trust during his or her lifetime. |
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