Saturday, August 4, 2012

 THE LIVING TRUST IS RIGHT FOR YOU

by David McCarthy 

Natalie Wood's death has been cited as an argument for having a so-called "living trust" because when her estate was in probate an inventory of her property was on file and open to public inspection. Privacy is only one of the advantages of having a "living trust" (also known as an inter vivos trust).   
  • Do you have children who are minors, or have special needs, or are spendthrifts?
  • Are you in retirement, up in years, starting to slow down?
  • Would you like to reduce the amount of taxes you pay?
  • Are you philanthropically inclined?  
If you answered yes to any of those questions, a "living trust" is right for you.
You can use a trust to provide for minor children after you die, to provide for a special-needs child of any age throughout the child's life, to provide for children who just don't know how to handle money by establishing a trust that cannot be reached by the creditors of a spendthrift.
A trust permits easy transfer of your property to the beneficiaries after your death. It takes six months, minimum, to get through probate in Illinois, and as a rule, distribution of property to the heirs and beneficiaries occurs at the end of the probate process. If you want your beneficiaries to have your property without the wait, the trust can be drawn accordingly.
A trust and its creator (called the settlor) are two different persons in the eyes of the law and two different taxpayers. This can produce significant tax savings.
In our judgment, one should have a trust in addition to having a will rather than in lieu of having a will. One of the challenges of having a trust is making sure that all your property gets into the trust, and that whenever new property is acquired, it, too, is placed in trust. This is often easier said than done. And the next thing you know, the person who established the trust (the settlor) personally owns property that did not make it into the trust and which, therefore, is subject to probate.
Understand this about probate. Whether it does or does not live up to its nightmarish reputation will depend almost entirely on whether the heirs and beneficiaries do or do not get along with one another. The expense, the time, and the emotional toll will increase as the level of contest and hostility increases. Illinois has long had a form of probate known as "independent administration." Had Natalie Wood's case undergone "independent administration" in Illinois, the inventory of her property would never have become a matter of public record. However, if the heirs and beneficiaries are at each other's throat, and one of them asks for "supervised administration," then the inventory would become a matter of public record.
The upshot: Have a will and a trust. You won't regret it.