Why do I need a living trust?
Have you set up your plan for when you die? Have you taken the time to set up your estate plan?
Money is a huge driver for decisions as well as a source of conflict in families. Many money problems can exist and perpetuate after you die. It’s imperative to spend time creating an estate plan to give your family peace when you die.
As CPAs, Tom and his team advise clients on the tax implications and refer to estate planning attorneys to help with these important plans.
Tom interviewed Bill Clarke, an estate planning attorney, to expand on this discussion.
Yes, it can be uncomfortable discussing and planning what happens in the event you become disabled or planning what happens when you die.
For most people know about a will and the need for one, especially if you have minor children. However, a will is not enough. You need to set up a living trust.
Discussing this with Bill, he points out three reasons for a trust:
A trust offers the benefits of holding your assets during your lifetime.
You avoid probate administration.
You’re able to specify your intentions, level of control of your assets, and how you want your assets handled and administered after death.
Tom believes that a living trust is a great idea as it puts you in control even after you die. Probate can be a simple process or a difficult one depending on the state. Therefore, having a living trust can help you avoid this process altogether. Remember, it’s important not only to establish your living trust, but also to implement your trust properly. This means making sure you title your assets in the name of your trust prior to your death. If not, then those assets must first go through probate. Tom had a client with a lot of assets who had multiple marriages and children. He had his estate plan all figured out except that he did not transfer the title of the assets to the trusts. This led to a lengthy litigation nightmare. This is an example of having a good plan but not implementing it properly.
Living trusts are relatively easy and inexpensive to set up and simple to operate. According to Bill, typically, with a revocable living trust, there is very little to no change in how you own and operate your assets. Revocable living trusts do not require you to file a separate trust income tax return and you can use your own personal social security number for tax identification purposes. Sometimes people can be hesitant about trusts because they fear that banks won’t understand this. However, banks seem to understand living trusts and know that there are no tax consequences. Living trusts are not hard to set up, and they make it easy for your family when you die or if you become disabled. You don’t want to have to worry about your family getting into arguments over money after you die.
When it comes to your estate planning, as Bill mentions, your estate plan must have a current and viable healthcare power of attorney, financial power of attorney, revocable living trust and will, and your assets must be properly titled in the name of the trust or have the proper death beneficiary designation.
Money is the biggest source of conflict for families, and you don’t want to create conflict when you die. To mitigate potential conflict, plan for what happens when you die. When you do this, you take care of your family, give them peace, and allow them to grieve. We encourage you to spend time finding the right estate planning attorney for your team and to set up a good estate plan. When you do, you will make way more money and pay way less tax.
To find out how TFW Advisors® can help you with your estate planning, schedule a call with us today!