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Question:


What is a living trust?
-Gail


Answer:


A trust provides a legal framework for passing on your assets after you die. A living trust, as the name suggests, allows you to accomplish the same task while you’re still alive. You can maintain control over your assets by naming yourself, and your spouse if you have one, as trustees. You can place assets in the trust, take them out again or give them away without the inconvenience of dying. If you so desire, you can even dissolve the trust; that’s why the full name for this type of vehicle is “revocable living trust.” Because the point of a living trust is effective estate planning, people who set up trusts generally name their children to be successor trustees after they die. That allows them to take control of the assets smoothly and privately, usually avoiding the need for probate.

Living trusts do not limit estate tax liability per se, but they can be written in a way that ensures that the heirs of a married couple benefit from the tax exemption that the estate of each of them is due – $5.25 million for 2013 – effectively doubling the amount that escapes taxation in the case of large estates. It is typically more expensive to set up a living trust than to make a will, but badly written trusts can cause big headaches and tax bills at times of acute difficulty for families, so doing one on the cheap is probably not a good idea. It’s best to consult a lawyer or financial adviser rather than to use something off the shelf from a book or website.

-Conrad de Aenlle



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