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A living trust is created to serve you.  You maintain complete control while you’re alive, give clear instructions on how to take care of you in the event you are incapacitated, and direct what happens when the inevitable occurs. Our estate planning professionals will personally visit with you about your individual circumstances. Once we understand your personal situation and what you want to accomplish, we can help you identify the most effective way for you to protect your hard-earned assets and the best method to get them where you want them to go.

Because of the many benefits a living trust provides, it is a very useful and extremely powerful tool when created properly. A living trust is the most popular estate preservation tool we offer.

Here’s what you’ll learn on this page:

What Is a Living Trust?
How Does a Living Trust Work?
What Are The Advantages Of Using a Living Trust?
Revocable Vs Irrevocable
If I Make a Trust, Do I Still Need To Make A Will?
Tax Benefits Of An Irrevocable Trust
Do You Have To Put a Lot Of Money In A Living Trust?
How Does a Trust Prevent Court Control of My Assets If I’m Incapacitated?


What Is A Living Trust?

Living trusts are most often used in estate planning as a way to smoothly transfer property after the grantor’s death.


Since the successor trustee has the legal authority to act at the grantor’s death or incapacity, the probate court does not need to issue an order approving the transfer of the trust property.

This is often the main reason people use a living trust as part of their estate plan. The assets that are held by a living trust after your death can be distributed immediately by your successor trustee. Because these assets are held by your trust rather than your estate, they do not have to go through the probate* process.

Almost anything of any value can be placed into a living trust.

• Real estate
• Bank accounts
• Vehicles
• Fine art & jewelry
• Valuable intangible items like mining rights, intellectual property and crypto currency


*Probate is a court-supervised process that can become complicated as well as time-consuming, and during this time the assets undergoing probate will be inaccessible to any of your beneficiaries, all while incurring court costs. A trust allows you to skip the probate process and transfer assets as you have designated, to whom and how you have specified.

How Does A Living Trust Work?

A living trust is a legal entity, meaning it can own property and hold legal authority.  It gives you the ability to manage your estate yourself without holding these possessions in your name because when a trust is created, ownership of assets is transferred to the trust itself.  Further, the trust allows you to clearly specify what you want to happen in the event of your incapacitation or passing, so that when these events occur, many difficult decisions are already made and no one is left to guess or override your wishes.


For example, if you transfer an investment property from your name into the name of a trust, you do not own the property anymore – the living trust does. The same applies to bank accounts, vehicles and anything else you want to put in there. This process is called funding the trust. Those items together form a trust fund.


As the grantor of the trust, you appoint a trustee, which is usually yourself, at least initially.  You further name a successor trustee who will ensure the instructions in the trust are carried out in the event of your incapacitation or death. This person could be a relative or an appointed professional trustee from AFEPI. The successor trustee is obligated by law to do exactly as you have outlined in your trust.


From that trust fund, you can leave your full inheritance to your heirs (called the beneficiaries) or anyone you designate. You also have the power to place conditions on beneficiaries prior to them receiving their inheritance (like a grandchild finishing college before receiving a lump sum of cash).

What Are The Advantages Of Using A Living Trust?


1. Saves time and money – Probate is a legal process that can be lengthy, complicated, and expensive. The process of probate must be completed and all legal fees paid before your beneficiaries are granted access to any of your assets. A trust allows your estate to skip the probate process and efficiently transfer ownership of your assets as you have designated.


2. Protects your privacy – A will is a public document, therefore anyone can get a copy of it from county records after your death. A living trust, however, is totally private. No one can know the details of your trust without the trustee providing them the information.


3. Offers more protection – Because a will is easily obtainable as a matter of public record and subject to probate, it is not uncommon for a will to be contested by someone the deceased has never even met.  Because a living trust is not a matter of public record and not subject to probate, it is far less likely to be successfully challenged than a simple will. Challengers must prove you were coerced into signing documents and forced to complete the process of funding the trust.

Revocable vs Irrevocable

A Revocable Trust

If you’re looking for an estate planning vehicle that offers privacy advantages and control over assets, a revocable trust is a good place to start.


A revocable trust must be implemented as part of an overall estate plan. With a revocable trust, the trust assets can be shifted around, and the trust is fairly flexible in its structure. Just as the name suggests, you can change or cancel it at any time while you are still alive.


A revocable living trust avoids the often lengthy probate process, but by itself doesn’t provide shelter for assets from federal or state taxes.


While You’re Alive

With a revocable trust, the person creating the trust retains control of the property and frequently serves as the trustee. You can therefore manage your assets during your lifetime. A revocable trust may be changed or terminated by the grantor of the trust.


As the grantor of the trust:

• you will transfer ownership of your property to the trust

• you will designate a Trustee to manage the trust under whatever conditions you choose

• you will have control over the property in the trust until your death or incapacitation

• you can make changes, additions and updates to your trust


The status of the revocable trust shifts to irrevocable when you pass away.

It is common for a revocable trust to pay all income to the grantor (you) for life and to pay the trust assets to named persons after your death. Furthermore, since the probate court records are open to the public, a revocable living trust can also provide you with additional privacy.

The revocable trust is by far the most common type of living trust.

An Irrevocable Trust

Irrevocable trusts are very complex and they are only used in very specific situations, usually to preserve benefits or avoid creditors and taxes. With a revocable trust, the transfer of assets to the trust isn’t permanent as long as you’re still living. An irrevocable trust, on the other hand, involves a permanent transfer of assets.


Because an irrevocable trust cannot be changed, you want to be extra careful to understand its terms. Unlike with a revocable trust, where you reserve the right to dissolve or change the trust at any time (as long as you’re mentally competent), an irrevocable trust is, for the most part, forever.


A good candidate for an irrevocable trust is a doctor or surgeon who is at risk of malpractice and could be sued in a court of law. In that scenario, an irrevocable trust provides a shelter against such lawsuits and provides ideal asset protection.


Irrevocable trusts also shield assets from creditors and help provide for family members who benefit from not receiving a single, large gift. Additionally, if it is an irrevocable trust, it may not be considered part of the taxable estate, so fewer taxes may be due upon your death.


Some types of irrevocable trusts include:

• Irrevocable Life Insurance Trust

• Irrevocable Family Trust

• Medicaid Income Trust

• Special Needs Trust

• and Charitable Trust


An irrevocable trust is generally preferred over a revocable trust if your primary aim is to reduce the amount subject to estate taxes by effectively removing the trust assets from your estate.

If I Make A Trust, Do I Still Need To Make A Will?

Just as there are things a trust can do that a will can’t, the opposite is also true.

First, a living trust can only cover property you have transferred, in writing, into the trust. It’s very difficult to name and therefore move everything you own (down to your skivvies) into a trust.  No one wants to constantly update an inventory.  Furthermore, you could acquire property shortly before your death. If it’s not in the trust, it won’t pass under the terms of the trust document. But there is a simple solution.


A simple document known as a “pour-over” will directs that all your remaining property be poured over into your trust. It covers the forgotten and any future property that wasn’t outlined in your trust. We include this in your estate preservation plan to cover all the bases so your final wishes can be honored.


Second, a living trust cannot appoint a guardian for your children. If you have minor children, you will need a will to name a guardian.  


So, in a thorough estate preservation plan, the two work together.  A living trust efficiently transfers property, saving time and money for your beneficiaries.  A will catches the things that can’t be placed in a trust and provides for the care of your minor children. 

Tax Benefits Of An Irrevocable Trust

When you set up an irrevocable trust, the property you place in it no longer legally belongs to you.In exchange for giving up ownership control of these assets, the IRS offers specific tax benefits that are not available to any other estate planning tool.


An irrevocable trust is taxed as trust income, not earned income, which can result in a reduction of taxes owed on the property held in the trust. This makes your irrevocable trust a legally independent entity. If you placed income-earning property into this type of trust, the IRS will treat the income as trust income, not your income. This has the potential to put you into a lower tax bracket, even if the trust is at the lowest income tax rate.


Check with our team or your CPA for the current estate tax exemption. Strategically, it may make sense to move assets into an irrevocable trust and name your heirs as beneficiaries if you anticipate the value of your estate will surpass the estate tax exemption for the year of your death.


Don’t forget life insurance proceeds! If you have a life insurance policy that would cause your estate to exceed the allowed estate tax exemption, you should consider placing it in an irrevocable trust. Even if your estate would be taxed based on your other assets, you can utilize an irrevocable life insurance trust to help your heirs pay the estate taxes due after you die.

Do You Have To Put A Lot Of Money In A Living Trust?

No. There are no minimum value requirements for an asset to be included in a trust.  However, there are times when a trust may not be the best vehicle to get you where you want to go.  Our team will help you identify the best and most effective way to protect your assets and move them on to your heirs when it’s time. You can rest assured your estate will be protected and your final wishes completed.

How Does a Trust Prevent Court Control of My Assets If I’m Incapacitated?

Proper preparation of a trust includes planning for the possibility you (in most cases the trustee) may become incapacitated. We will help you prepare it so the requirements that must exist for a successor trustee to take responsibility will be in proper order in the event you are unable to continue caring for yourself.


So since this plan is predetermined, the trust will continue to operate as it did when you were grantor/trustee, holding your assets in preparation for transference when it’s time. Your estate planning team member will help you determine additional things to consider when leaving instructions for your care while you’re still alive, yet unable to care for yourself.

Wrap Up: Advantages of a Living Trust

A living trust is a powerful estate planning tool. There are six major benefits we’ve covered on this page.


1. It eases the process of transferring assets after death.

2. It eliminates the need for probate court.

3. It reduces the risk of people contesting your wishes.

4. It designates beneficiaries.

5. It establishes trustee(s).

6. Compared to a will, a revocable trust provides increased privacy and more control and flexibility over asset distribution.


Our estate planning team is eager to answer any questions you may have about protecting your family legacy. Asset protection, financial strategy and estate preservation have been our life long work. Take advantage of our years of experience and let us help you protect yourself and your heirs so you can be sure, when it’s time, they are taken care of.


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