In the event of incapacity, Living Trusts have proven to be a flexible and efficient tool to manage property during ones lifetime. In the event of death, Living Trusts provide an effective means to minimize estate tax consequences and maximize the transfer of wealth from one generation to the next, and can provide asset protection for the decedent's beneficiaries.
A Living Trust is a written property agreement drafted by a qualified estate planning attorney wherein you, as the grantor (or settlor) transfer your property to a trustee for the benefit of named beneficiaries. During your lifetime you are the sole grantor, sole trustee, and sole beneficiary. The document details how you want your property managed and distributed during your lifetime and after your death.
Once drafted and executed, your Living Trust must be funded to be effective because a Living Trust only controls property that is specifically titled in the name of the trust. This means that real estate, bank accounts, investment accounts, and other assets must be re-titled to change the ownership of the asset from you, individually, to your trust. For example, assets owned by "Lindsey Markus", must be transferred to my Living Trust by re-titling them in the name of my trust: "Lindsey Markus Living Trust". You would continue to sign for the assets, however as "trustee" of your Living Trust. ("Lindsey Markus, Trustee of Lindsey Markus Living Trust").
No Extra Tax Filings
During your lifetime, you may serve as the sole trustee of your trust and you may continue to deal with the assets in the trust exactly as you always have. There is no loss of control or your ability to buy, sell, transfer, invest or gift your assets. Because you are the sole grantor, trustee, and beneficiary of your Living Trust, the taxable income from any trust property continues to be reported on your individual tax return with no additional filing requirements. Thus, any property owned in the name of the trust will be treated by all parties (including the IRS and any creditors) as if you own the property in your own name. There are no ongoing fees to maintain the trust and the trust does not have to file any special tax returns.
Easy to Amend
Just as the name implies, the Revocable Living Trust is "revocable" and can be revoked or amended at any point in time. You continue to maintain all control over the trust property and at any time you may change the beneficiaries, successor trustees, or any other terms of the trust.