Living trusts are powerful estate planning tools that can protect you if you become incapacitated. When establishing any trust, the services of a qualified attorney are needed. Certified public accountants are familiar with the operation of the trust, of course, but only an attorney can properly set up a trust agreement conforming to your state’s standards.
Trusts by definition are established when a settlor provides assets to a trustee for the benefit of others. A husband and wife can establish a living trust with themselves as trustees and beneficiaries. Children are generally listed as beneficiaries upon death of the parents. If one of the parents were to become incapacitated, the other will assume the role of sole trustee and many times, an alternate trustee is designated in the event both spouses are incapacitated at the same time. Control returns to the original trustees when their incapacity ends. Upon death of the grantors, an administrator will distribute assets according to the trust agreement.
Living trusts are revocable trusts which mean that the grantor can change any aspect of the agreement during their lifetime. If children come into the family after the creation of the trust, it is relatively easy to amend the initial agreement to benefit them. Likewise, the role of trustee can be reassigned when necessary.
In many cases, the majority of assets are placed into the living trust at creation or during the lifetime of the grantor. A pour over will can add any omitted assets to the trust upon the death of the grantor. Because the grantor maintains control of the assets, estate taxes will apply in the same manner as if there was a will, depending on your situation, this flexibility may be well worth any potential tax.