Personal Planning Ideas

When Colonel Harlan Sanders of fried chicken fame died, the contents of his will were published in various newspapers. But the newspaper accounts must have been a disappointment to the curious. Essentially, all the will said was that the bulk of the Colonel’s estate passed under a trust established during his lifetime. The trust mentioned in Colonel Sanders’ will was undoubtedly a revocable living trust. When linked to your will, the revocable trust can provide considerable privacy for your estate. In addition to a unified estate plan, your trust also can provide:

• Protection against disability. Suppose you become incapacitated and are temporarily or permanently unable to manage your affairs. If your assets are in a trust, the trustee can continue to handle your property on your behalf – without resort to court-appointed “guardians.”
• Reduced probate costs. Property you transfer to a revocable living trust during life is not subject to the delays, expenses and restrictions of probate. Avoiding probate can be particularly important if you own real estate in several different states – subjecting your assets to multiple probate procedures.
• Support for charitable organizations. You can use your revocable living trust to make a gift that benefits our future. Your gift will be channeled through your trust and distributed according to the instructions you have left in the trust. Such gifts are 100% deductible for federal estate tax purposes. Any charitable gifts made during your lifetime may be deductible on your personal income tax return.

Note that the revocable trust is really not a tax planning tool. During your lifetime, all trust income, including capital gains, will be taxed to you and any deductions will be passed through to you. All the trust property will be included in your estate for federal estate tax purposes.

Are there disadvantages to living trusts? Many people serve as their own trustees when they establish revocable living trusts. This can be simple and inexpensive if the trust is unfunded (inactive). But if large amounts of cash or property are transferred to the trust, the complexity of trust management may require professional administration by a bank trustee or a professional trustee. That means annual trust fees. Additionally, there are legal fees to pay when you establish a revocable living trust, for the cost of drafting the trust and retitling your assets in the name of the trust. Your trust can be an effective planning tool to augment a will, but it should not be used to the exclusion of a will. The benefits of a revocable living trust should be weighed against the costs involved and the particular needs of your estate. Even if you do have a living trust, you still need a will to “clean up” any assets not placed in trust during your lifetime and to name your executor and perhaps a guardian for someone in your care.

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