Provided by Taylor McClish
Everyone should have a will.
If you die without a valid will in place, state law will determine how
your assets are distributed to your heirs.
The question is, when do you need more than just a will?
You see the ads all the time: “Should you have a living trust?” There
is no pat answer. The more complex your estate becomes, the greater the need
for an estate strategy. A living trust could play a role in that strategy.
While not everyone needs a living trust, some estates create them with
an eye toward streamlining the transfer of specific assets.*
*Using a trust involves a complex set of tax
rules and regulations. Before moving forward with a trust, consider working
with a professional who is familiar with the rules and regulations.
Why a living trust?
Think of a living trust as a step up from a basic will. It is designed
to carry out the basic functions of a last will and testament, and in addition,
it also offers you (the trustee) four important potential benefits.
First, assets in a properly written and funded living trust are
positioned to potentially avoid probate. Wills are commonly probated, especially
if an estate is large or complex. In some states, the probate process can drag
on for months, even years.1,2
Second, a living trust is a private document. A will filed in probate
court enters the public record, and may be examined by anyone. There may be
financial circumstances and beneficiary decisions that you wish to keep
private, especially with regard to your legacy or your reputation.3
Third, a living trust strategy can incorporate a financial or health
care power of attorney. These documents can instruct your loved ones on what to
do if you become severely disabled, gravely ill, or incapacitated. They give a
trusted party the power to act legally on your behalf. Additionally, with a
living trust, your spouse (or other alternate trustee) can be instructed to
manage your affairs as soon as you are unable to, without courts interfering.4,5
(It must be noted that not all financial institutions will recognize a
durable power of attorney by itself, especially if it was created some time
ago. There are also occasions when they may not recognize a valid living
trust.)4
Fourth, a living trust lets you transfer assets to your heirs with
conditions attached, if you so desire. You can control the way assets are
distributed, even after you die.
Typically, a living trust is revocable. That means that you can
make changes to its terms while you are alive. Upon your death, it becomes irrevocable,
meaning its terms cannot be changed unless all the named beneficiaries of the
trust approve the changes.1
Why not a living trust?
Okay, so with all these potential advantages ... why doesn’t everyone
have a living trust? The fact is, some people have relatively simple estates,
and not everyone needs a living trust – at least not right away.
A well-written will and durable power of attorney may suffice until
you hit your sixties. If you are married and pass away before then, the assets
you and your spouse hold in joint tenancy or as community property may transfer
to your spouse without being probated.6
Should you create a living trust in your forties or fifties, you may
end up revising the trust again and again over the decades to come. Certain
life events - such as a divorce or a marriage - may demand that the trust be
updated. There is also another risk worth noting - the risk that you might
forget to revise a trust created “eons ago.”
Some people do get lax with their living trusts in another way – they
have one drawn up, but they never transfer any assets into it. They treat it
like an “option” they can use in the future. If they die without placing their
investment accounts, real estate, etc. into the trust, those assets could be
exposed to probate. If so, the trust will be meaningless.
Why not a will and a trust?
You may want (or need) to have both. Chances are, you will not put
100% of your assets into a living trust; your will can direct where assets left
outside the trust should go when you die.
Alternately, a pour-over will may be used to transfer designated
assets held outside the trust into the trust, to help your estate distribute
those assets according to the trust terms. So, wills and trusts can work
hand-in-hand.7
What’s right for you?
You may be wondering whether a living trust is appropriate. Or you may
have one, but believe it needs revisiting. You may sense that you need to adopt
an estate strategy, or expand one. Trusts are complex, and a professional can
help. I can be your resource for ideas and answers. Contact me, so that we may
begin our search for those answers together. I am happy to speak with you.
Sincerely,
Taylor McClish
Taylor McClish may be reached at (503) 239-3060 or Taylor.McClish@cunamutual.com
Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.
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Citations.
1 -
smartasset.com/retirement/what-is-a-revocable-living-trust [7/18/19]
2 -
investopedia.com/ask/answers/101915/when-are-beneficiaries-will-notified.asp
[7/19/19]
3 -
investopedia.com/articles/pf/06/revocablelivingtrust.asp [3/7/19]
4 -
retirementwatch.com/power-attorney-vs-living-trust-pros-cons [7/29/19]
5 - info.legalzoom.com/power-attorney-vs-trustee-20627.html
[8/13/19]
6 -
investopedia.com/articles/pf/08/joint-tenancy.asp [5/28/19]
7 -
thebalance.com/pour-over-will-3505584 [3/12/19]