Prescott Tax and Paralegal Looks at Pros and Cons of a Living Trust in Prescott

Most of you have probably been invited to one or more estate planning seminars discussing living trusts. Like everything in life, one size does not fit all. Prescott Tax and Paralegal would like to look at some items that need consideration when working on your personal estate planning in Prescott.

First, let’s talk about what a living trust actually is and what it does. A trust is an arrangement under which one person, called a trustee, holds legal title to property for another person, called a beneficiary. You can be the trustee of your own living trust, keeping full control over all property held in trust. A "living trust" is simply a trust you create while you're alive, rather than one that is created at your death under the terms of your will. The main advantage of making a living trust is to spare your family the expense and delay of probate court proceedings after your death. But do you really need a trust? Let’s look at the pros and cons.

Pros:

• First of all, should you become incapacitated, you have spelled out how the trustee should manage your trust assets in the terms of the document. Managing your assets this way is far superior to relying on a power of attorney document because:

• It will be recognized in all 50 states

• If the original trustee has died or become incapacitated, it will contain detailed provisions for who should be the successor trustee and how they are to be selected

• It will be recognized by banks and brokerage houses as valid, unlike many powers of attorney (which are frequently challenged or ignored by such firms, rightly or wrongly).

• Upon your death, the trust acts like a will and spells out who gets the trust assets, but it avoids the probate process.

• This ensures privacy of your distribution choices, usually avoids dealing with the court system and saves on attorney fees.

Cons:

• If your assets will avoid the probate process as they currently stand, then this approach may be redundant for your situation.

• Many people pay thousands of dollars to an attorney to draw up a detailed living trust for them, but then they fail to transfer title to their assets into the name of the trust (called “funding” the trust), or they fail to keep up with the proper titling after they purchase new items or real estate. In such cases, they are not taking full advantage of the benefits of the arrangement.

• Trust administration can be time consuming and costly depending upon the complexity of the distributions after death.

• After the Trust creator dies, the Trust pays income taxes at a higher tax rate than individuals and reaches the highest tax bracket of 37% when the Trust income reaches $12,501 (2018 tax rates)

Successful estate and trust planning is crucial to offering your family and loved ones financial security and peace of mind during a time of loss. In order to eliminate complications and ensure your wishes are followed, it's important to have a detailed plan as to how your assets will be distributed. For help in this process, or if you have questions about living trusts and estate planning in Prescott, contact Prescott Tax and Paralegal at 928-778-3113. To learn more about the services we offer, please visit our website at http://www.PrescottTax.com.

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