When developing your estate plan, consider including a trust

Living trusts are an often overlooked part of estate planning for middle class persons.

When you ask many people about estate planning, many will mention wills. However, although important, wills are only part of a comprehensive estate plan for some. In addition to a will, many will also choose to include a trust (or several trusts) as a means of distributing their property after death. Although trusts have a reputation as being only for the wealthy, they are an advantageous tool for those with estates that are more modest.

What is a trust?

One of the most popular trusts is an inter vivos or living trust. As its name suggests, this type of trust is created while you are still alive. This trust is simply a written agreement where you as the settlor or the trust choose a trustee-a person or institution that is charged with the management of your property-to manage the property contained in the trust for the benefit of your beneficiaries-the people or institutions that will ultimately receive your property.

The trustee can be virtually anyone, including yourself. Once chosen, the trustee has a duty to manage the trust assets according to your wishes that you express in the trust documents. Upon your death, the trustee distributes the assets in the trust according to your designations.

Why should I choose a trust?

Although wills and trusts can both distribute your assets after your death, trusts offer several benefits over wills including:

Tax advantages: When you develop and transfer property to a trust, the property becomes titled in the name of the trust. Since the assets are no longer in your name, they are no longer subject to estate taxes.

Privacy protection: If you die with only a will, your property must first undergo the probate procedure before it may be distributed. Like all court cases, probate is a matter of public record, so the general public may assess the particulars of your estate. Since trusts avoid the probate process entirely, the terms of them may be kept private.

Enhanced control over asset distribution: Your property subject to a will must be distributed immediately after clearing probate. However, a trust allows you greater flexibility and control over when your assets are distributed to your beneficiaries. For example, you would be able to hold off the distribution of an inheritance to a child with spendthrift tendencies until he or she reaches a responsible age. Additionally, you can specify how your beneficiaries may use your assets. For example, you may specify that the trustee distribute the proceeds of your property to your children only to cover educational expenses.

Depending on your goals, a trust may or may not be the right way to proceed. An experienced estate planning attorney can consider your situation and explain the best way to ensure that your wishes are carried out.

Keywords: estate planning, trusts