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 : Estate Planning & Advanced Estate Planning

“Estate Planning” Is Wide-Ranging Term
When someone uses the expression “estate planning” they are using terminology that paints with a very broad brush. In a technical sense, estate planning encompasses many potential techniques available in planning estates – including Living Trusts. However, you can mostly divide estate planning into two major categories – 1) Revocable Estate Planning (Living Trusts & Wills etc.) and 2) Advanced Estate Planning -- which is generally irrevocable. Examples of available advanced estate planning tools are irrevocable life-insurance trusts (ILITS), charitable remainder trusts (CRT), lifetime gift giving programs, family limited partnerships, foundations, irrevocable trusts, and even some advanced retirement planning, etc. While many of these devices are good in theory they tend to be quite involved and costly to implement.

A Living Trust Is Most Of The Estate Planning Many Ever Need or Want
Not to say that advanced estate planning techniques don’t have their place, but the vast majority never have the circumstances or desire for advanced estate planning (their estates are not large enough) -- and many who technically qualify, still will never want or use it. The fact that the exemption continues to rise dramatically and that the estate tax may even be eliminated further narrows the field for advanced planning. Where this is all leading is to the fact that a Living Trust is all of the estate planning the vast majority of folks will ever need or desire.

Advanced Estate Planning Is Usually Only For Larger Estates
As a general rule, the minimum threshold to even consider “advanced” estate planning is an anticipated estate value of over $2 Million for married couples and $1 Million for singles. I must put extra emphasis on the word “considered” -- because many wealthy individuals find the irreversible consequences of advanced estate planning so unappealing and complex they don’t want to have anything to do with it. Advanced estate planning is no trivial matter in that it involves a complex series of steps characterized by permanent, irrevocable decisions. You can’t change your mind later and take it back if you need it, or if a beneficiary becomes your worst enemy.

Revocable Living Trusts vs. Irrevocable Trusts
The words revocable and irrevocable can sound very alike. Don’t confuse the two. A Living Trust is a revocable trust which can be changed or cancelled at any time. On the other hand, an irrevocable trust can never be changed, altered or withdrawn. Irrevocable trusts are a highly specialized tool for special situations and certain advanced estate planning methods. Comparatively very few ever want or need an irrevocable trust, especially once they understand what irrevocable means.

(Establish Your Living Trust First)
Combining Revocable With Irrevocable Planning Can Be Overwhelming and Counterproductive
Finally, even if you may desire advanced estate planning, you still need a revocable Living Trust as the base part of any estate plan. Arguably, it is the first order of business before tackling or thinking about anything else. Combining revocable with advanced planning in an “altogether, all at once approach” can prove to be very confusing and involved. A Living Trust is a much different and easier decision process because you can still change your mind at any time (revocable and amendable); whereas advanced estate planning is a languishing beast of multiple, generally irrevocable, complex decisions you can never undo.

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