Hello, this is Song Dong Ho. There is a saying that animals leave their skins behind when they die, and people leave their names behind when they die. But nowadays, there are many things to leave behind besides a name. Working hard for a lifetime and enjoying a healthy and enjoyable consumption life is a happy thing to say. And if you’ve been diligent about saving and accumulating assets, that’s even better. But what if the fruits of your labor are used against your will after you’re gone? Or if it causes your beloved children and relatives to fight, turn against each other, and never see each other again. Estate planning is what you need to prevent these unfortunate events from happening in the first place. When you think of estate planning, you probably think of a will, and it’s a popular form of estate planning. However, there is another type of estate plan that many people use that is just as popular: a living trust. Today, we’re going to take a closer look at living trusts.
Let’s start with how a living trust works: The person who wants to manage their estate creates a trust. This person becomes the Grantor of the trust. The Grantor moves their property into the Trust and appoints a Trustee. The Trustee manages the trust assets for the Grantor’s benefit while the Grantor is alive, and after the Grantor’s death, the trust assets are distributed directly to the Grantor’s designated Beneficiary. This is the most basic type of inter vivos trust.
The grantor can name someone else as trustee, but they can also name themselves. In practice, most grantors who create an inter vivos trust name themselves as trustee. This allows the grantor to use and enjoy their property while they are alive, just as they would have before creating the trust. If you’re a married couple, you can create separate living trusts and manage them separately, or you can create one living trust and manage the trust as co-trustees.
So, what are some of the advantages that make many people choose an inter vivos trust as a way to manage their estate, even though it may seem complicated? First, it eliminates the need to go through the probate process. Probate is the process by which an individual’s estate is distributed to their heirs under the control of the court when they pass away after leaving a will. There are many steps involved before probate is completed. An executor and estate administrator must be appointed, all of the deceased’s assets and debts must be identified and legally notified to creditors, all debts must be paid, and all tax issues, including the deceased’s income taxes, must be sorted out. The process can take anywhere from as little as six months to as long as 18 months or more to complete, especially in states like New York, where recent cuts in government funding for courts have resulted in many court staffing reductions, and as a result, probate is taking longer to complete. The probate process can be not only time-consuming, but also costly. Because probate is a lengthy court proceeding, there are additional costs associated with it, including court fees and attorney fees. However, property placed in an inter vivos trust can be distributed to your heirs without the need for this complicated and costly probate process. If you own property in multiple states, you should definitely consider an inter vivos trust. This is because if you die without transferring ownership of your real estate to a living trust, you’ll have to go through the probate process in each state where your property is located.
Another advantage of an inter vivos trust is privacy. A will, for example, becomes a public document the moment it is admitted to probate, meaning that anyone can see what it says and what assets the deceased had if they want to. In contrast, an inter vivos trust is a very private document, and no one else can see the contents of the trust unless the parties to the trust want them to.
There are many other advantages to using a living trust to manage your estate. Next time, we’ll take a more in-depth look at inter vivos trusts based on questions that many of our clients ask.
People take care of so many things while they’re alive. We take care of our skin, our hair, our nails, our bank accounts, our gardens, our relationships, and the list goes on. But even if all of these things are taken care of during your lifetime, if your estate is not properly organized, it will not be a beautiful end to your life. If you are interested in learning more about how to organize your estate, including an inter vivos trust, I encourage you to consult with an attorney experienced in estate planning to ensure that your final affairs are handled in an efficient and organized manner.
If you have any further questions about the content of this column, or if there is a piece of law you would like our readers to know about, please do not hesitate to contact us at mail@songlawfirm.com.