by Deborah Miller, JD Senior Director of Planned Giving West Virginia University Foundation Inc. Many people fool themselves into thinking “I don’t have an estate, and I don’t need an estate plan.” But financial management and control are issues that concern us throughout our adult lives, and estate planning is simply an extension of that. As we age, we sometimes look for ways to ease that responsibility or to provide a back-up system of financial control. Discussing with your attorney how you want your financial matters handled is an important first step. In general, the purpose of any revocable or irrevocable trust is to put conditions on the assets owned by the trust to control who receives how much and when. An individual will no longer own the assets; the trust will, but the assets in the trust will be managed to benefit one or more persons or entities. A revocable trust used for estate planning purposes is known as a “living trust” because it goes into operation during a person’s lifetime. The trust’s terms can be modified at any time or terminated at will. Contrary to popular belief, a living trust provides no reduction in income or estate taxes because it is revocable. (Irrevocable trusts do yield gift/estate tax benefits because the transfer of assets is permanent.) A revocable trust used for estate planning will also include after-death distribution terms, making it a “will substitute.” Through the trust, a person can include provisions for the same gifts to family, friends and charitable or educational organizations that would otherwise be included in a will. A formal will is also needed to transfer what’s not owned by the trust. An important consideration is who will operate the trust by serving as trustee and successor trustee. Some choose to serve as trustee (or co-trustee with a spouse) of their own trust and name a family member or a financial institution, such as a bank, as the successor trustee when they can no longer handle the administrative and distribution requirements. Others allow another person or institution to handle the trustee duties from the beginning. Of course, there are costs to establish a revocable trust and to transfer the title of property and assets to the trust. The costs and complexity of such transfers range from a new deed for real estate to special forms for stocks, bank accounts, bonds, etc. One benefit for some people is that a living trust document is not required to be recorded in the courthouse like a will is. A living trust is only one financial management option. Others find that a durable power of attorney paired with a will can accomplish similar goals with less complexity (no trust is used). The person acting as the agent is able to handle the same financial duties and transactions as a trustee can, and the will contains the after-death distribution provisions for the estate assets. Either way, having a back-up system of financial management can provide that all-important ease of mind. That’s good planning.
