If you have or your business owns real estate, then you should be thinking what to do once you are gone. That’s an important topic, and you would most probably be thinking of drafting a will, so that there is no misunderstanding or acrimony after you are gone.
A lot has been written about the use of “living trusts” (also known as a “revocable trust” or “inter vivos trust”) as a solution for problems associated with real estate planning through your Will.
Here’s a brief framework regarding “living trusts” in general, so that you can determine whether you should discuss this method with your attorney licensed to practice in the state where your estate would be administered.
A “living trust” describes a trust that you can:
(1) create during your lifetime, and
(2) revoke or amend whenever you wish to do so.
You can also create an “irrevocable” living trust, but that is permanent and unchangeable and is almost always done to gain certain tax results – and this topic is beyond the scope of this briefing.
The choice of a living trust should be made after consideration of a number of factors. A “living trust” is legally in existence during your life, has a trustee who is currently serving, and owns property which you have transferred to it during your life.
Consider the two possible scenarios:
(1) While you are alive, the trustee (could be you) is responsible for managing the property as you direct.
(2) Upon your death, the trustee (based on your nomination) is directed to either distribute the trust property to your beneficiaries, or to continue to hold it and manage it for the benefit of your nominees. Like a Will, a Living Trust can provide for the distribution of property upon your death. Unlike a Will, it can also provide you with a vehicle for managing your property during your life, and authorize the trustee to manage the property and use it for your benefit if you should become incapacitated, thereby avoiding the appointment of a guardian for that purpose.
It should be noted that there is no consensus on the best use of Living Trust. While some attorneys recommend the use of such trusts, others believe that their value has been over hyped up. So you have to apply it case-by-case.