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What is a Living Trust?
A written document that lets you control the distribution of your property (real estate, personal property, money) after your death.
You set up the trust and are called the "settlor," "grantor," or "creator."
Unlike a will, the living trust takes effect during your lifetime, once you transfer property or money into the trust's name.
You can name yourself, another person, or an entity (like a bank) the "trustee" to manage the property or money you place in trust during your lifetime.
You also name a backup or successor trustee to manage the property should you become unable to do so and to distribute the property according to your wishes after your death. (This person's function is similar to a personal representative named in a will).
What are the Potential Advantages of a Living Trust?
1. Unlike a will, property or money placed in a living trust generally need not go through probate; this can reduce the length of time before your property is distributed after your death.
2. You can name someone to manage your assets if you become unable to do so which can avoid a restrictive arrangement such as guardianship or conservatorship.
3. In general, a trust allows you to transfer property or money privately at death. (By contrast, a will is a public document once it is submitted for probate.)
4. As in a will, you can restrict how others use your property or money after your death such as limiting the distribution of assets until a beneficiary reaches a certain designated age.
Should I have a Living Trust?
A living trust can be an excellent estate planning tool, but it is not appropriate for everyone; the answer depends on your particular circumstances.
To answer this question, you should:
1. Review the amount and type of your assets.
2. Decide how you want your assets distributed.
3. Talk to several experienced estate planning attorneys, who are licensed in your state, about the actual cost to draft a will versus a living trust.
4. Also ask the attorneys approximately how much it would cost, and how long it would take, to probate your will.
How to Buy a Living Trust
Several groups around the country have been aggressively promoting the sale of living trusts to older Americans. Slick promotional materials indicate that thousands of dollars in probate costs and taxes can be saved simply by purchasing a living trust.
Sales representatives typically indicate that the consumer must act quickly, often the same day, in order to take advantage of the offer. Often, they also leave the impression that AARP is selling or somehow endorsing the product. AARP does not sell or endorse any living trust product and does not work cooperatively with any company that promotes or sells such documents. Consumers should be very wary of buying a living trust package sold in this way, because:
A living trust should be individualized to your particular needs and wishes, whereas living trust "packages" or "kits" generally are not;
Companies selling these packages often charge much more than an experienced attorney would charge;
Sellers of these packages often greatly exaggerate the cost and delay of probating a will and falsely claim that creditors will never be able to reach assets placed in a living trust;
Trust documents often are not drafted by attorneys or are written by attorneys who are not licensed in the consumer's state; the documents may not comply with the appropriate state law;
Sellers do not always tell consumers that they must transfer property into the trust in order to enjoy the benefits of the trust arrangement; and
Insurance agents who sell trust packages potentially can get access to the consumer's financial information and often try to sell the consumer additional products like annuities and life insurance.
For additional information, please ask for AARP's Product Report on Living Trusts and Wills (December 1991), D14535 and the Senior Consumer Alert on Living Trusts (Dec. 1993), D15210, published by the Consumer Affairs Section. It is available without charge from AARP Fulfillment, 601 E Street, N.W., Washington, D.C. 20049, tel 800- 424-3410.
Copyright 1994 by the American Association of Retired Persons.
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