Many of our clients find it advantageous to establish trusts during their lifetime. This involves preparation of a trust document and then transferring ownership of your assets to the trust fund created by this document.
The typical form that this sort of trust takes is that it is revocable during life, and becomes irrevocable upon death. It does not replace a will. But can be an important complement to a will, and an extremely important document in an overall estate plan.
Typically, the individual who establishes the trust (called the grantor) is the initial beneficiary as well as the trustee. If you are the grantor, that means you continue to receive the income produced by the trust investments. You can also reserve the right to withdraw principal amounts any time you wish. You can even reserve the right to discontinue the trust. The assets placed in trust remain within your control.
Under this type of "living" trust, the grantor will usually even act as the trustee in order to maintain maximum control - including complete power over the assets held within the trust, as well as the power to revise or revoke the trust. It's important to appoint at least one co-trustee or successor trustee who can take over at the time of the death or loss of competency of the grantor. Any mature adult who is well known and trusted by the grantor can be appointed as trustee.
The primary estate-planning advantage lies in the fact that, at your death, the balance of the trust assets are is either distributed directly to your beneficiaries or, if you wish, the trust can continue for your children or other beneficiaries. The trust avoids the delays, and a good deal of the expense, of the probate process.
If and when the grantor becomes incapable of managing his or her financial affairs, a successor trustee, chosen at the time the trust is first established, can simply pay the grantor's bills and generally handle the grantor's financial affairs. This avoids the expense and unpleasantness of a guardianship or competency proceeding.
Property transferred to a "living" trust in this manner is included in the grantor's estate for federal estate-tax purposes. This technique is not intended to reduce federal estate tax.
