Living Trusts Allow Freedom, Flexibility With Assets

OCEAN CITY – When most
investors hear the term “living trust,” they often think of something only
celebrities and the ultrawealthy use to shelter their assets from public view.
The truth is, anyone who has reason to keep some things about their net worth
confidential, even from relatives, might consider this vehicle as part of the
estate planning process. Assets held within a living trust bypass probate
court, removing them — and how you distribute them — from public view. The
ability to retain control of the trust’s assets during your lifetime, and to
add and remove assets at will, also make the living trust a flexible way to
manage your estate. There are many other pluses as well.

As the name implies,
living trusts hold significant advantages while you are still alive. One of the
main advantages is flexibility. Living trusts are revocable, meaning that you
can change the provisions and the trustees whenever and as often as you like.
And, unlike some other planning instruments, living trusts allow you the
freedom to use the assets at any time.

Another significant
advantage of having a living trust is the amount of control it gives you, even in
the event that you become incapacitated. The time may come when you are unable
to manage your own affairs due to illness or injury. The trustee (or trustees)
you assign to manage your assets in a living trust are bound by law as a
fiduciary (someone who manages the assets of another for their sole benefit) to
closely follow the directions you lay out in the trust. They must, in other
words, always act in your best interest.

And because the choices
are yours, there’s less likelihood of disputes among family members as to
whether your wishes are being carried out.

A living trust has many
advantages after death as well. All its provisions and contents, including
nonpublic property such as business holdings and portfolios, will remain out of
the public eye by avoiding probate court. Unlike wills, which must be settled
in probate court and therefore are a matter of public record, living trusts
(also known as inter vivos trusts) are private documents, Dodson says. As
assets from your trust pass to your heirs according to your specifications,
nobody needs to know except those directly involved.

However, even if you
have set up a living trust, you should still have a will. Not all your assets
will be included in the living trust, and a will is intended to help ensure
that your entire financial life is distributed based on your estate plan.

One disadvantage of some
trusts is the administrative burden: Trusts require regular oversight and
maintenance. Even if you do name yourself trustee, you’ll still need to designate
someone to succeed you as trustee should you become unable to serve in that
function yourself.

It’s also vital to have
a solid team of professionals advising you as you establish and maintain the
trust. Your financial advisor can discuss living trusts with you and can
introduce you to a trust specialist, as well as give you recommendations for
attorneys and accountants, if you don’t already have them.

(A Merrill Lynch Wealth
Management Advisor. She can be reached at 410-213-8520.)