Why a Living Trust?

Introduction

A Forewarning

Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17

Why a Living Trusts : Safely Managing Assets While You Are Alive

A Will Is Of No Use If You Are Incapacitated
All of us need to consider the possibility that, at some point in our lives, we could unexpectedly become incapacitated. Alzheimer’s, dementia, old age, brain damage, accidents, and other medical conditions are painful reminders of this possibility. Even if it is a hopefully temporary incapacity, doesn’t it make sense to have a plan and mechanism for safely dealing with the issue and properly managing your assets, paying bills, etc. just in case? The answer is obvious, and it is another area in which a Living Trust excels and in which a Will can do nothing at all. Equally useless in this matter is Joint Tenancy, pay on death accounts, or beneficiary designations – as they all require a death certificate. (Keep this in mind for later discussions on these poor alternatives.)

Your Incapacity Could Trigger An Expensive Conservatorship
Absent your own device for managing assets during incapacity your estate is headed to probate court. Think of it as “living probate” where your family must seek a formal conservatorship to manage your assets. True to probate form, establishing, then managing someone's affairs through a conservatorship is very expensive, highly bureaucratic, and time consuming. It involves numerous court appearances, significant attorney time and of course high legal fees. It all begins with initial accountings, oversight, court approval, appointment of conservator, and express permissions followed by continual accountings, oversight, justifications, and mandatory approvals. These ongoing requirements stay in place as long as incapacity ensues (often the rest of someone’s life). Probate never lets go. Commensurate with the process, the details of your personal and financial life will of course become a matter of public record. In essence this represents an opportunity for probate to take over your estate even while you are alive (and more so).

Keep Your Estate Away From “Living Probate”
A Trust Safely Manages Your Assets If You Are Incapacitated
An added advantage to a Living Trust is that it also serves as a vehicle to safely manage your assets in case of incapacity – eliminating the need for a conservatorship for asset management. This means no “living probate” that will drain your estate and the patience of your family at a remarkable rate. The trust specifies and allows your pre-designated successor trustee to step in and manage your assets if and when you are incapacitated. Importantly, there is a strong element of legal protection for you and your estate in that your trustee is liable and legally bound by his fiduciary duty to use and manage the trust assets properly and for your benefit only. This is an area where powers of attorney have no such built in protections and why powers of attorney are not a safe plan for incapacity. (Read below warning)

Warnings About Durable Powers of Attorney:
Be careful -- the same legal protection afforded to you by a trust is not available if you grant someone a durable power of attorney, or add someone as an “authorized signer” on your assets. Such moves are a very dangerous and risky way to plan for your incapacity or anything else. I have often referred to powers of attorney as “loose loaded canons on a ship in a storm”. They are an open invitation to financial ruin as there is no legal obligation or fiduciary duty owed to you. A person who possesses a power of attorney or open- ended signature authority can wipe you out and you will have no legal recourse. It happens all the time. Also, Powers of Attorney cease to be valid immediately at death and are thus of zero value in settling an estate.

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