Kyle Wynn & Associates and its predecessor firm have provided estate planning services to clients for more than forty-two years. We offer a variety of services in that area, including Wills, Powers of Attorney, Advance Healthcare Directives, and Trusts, both revocable and irrevocable. Of course, most people automatically think that a will is what they need to plan their estate, but we make people aware that they have options and we make them aware of the drawbacks that go along with having just a will. For instance, did you know that in order for your will to really do anything, it has to go through probate, which takes time and costs a lot of money? And did you realize your will is of no use whatsoever until you die? Would you rather allow your family to AVOID probate, with all its delays, costs, and loss of personal privacy? For many people, using a trust to plan their estate is a much better option.
What is a trust?
A trust is a legal document whereby property, real or otherwise, is held by one party for the benefit of another. Maybe that sounds confusing, but think back to when you purchased your home. You probably borrowed some of the purchase money by giving the lender a Promissory Note and secured your payment of that debt to the lender by pledging the property you were buying as collateral. In Mississippi, this would have been done by giving your lender a security interest by executing a Deed of Trust.
In this document, you gave legal ownership of the property to a Trustee of the lender, subject to your promise of payments. Most importantly, you reserved the right to use the property. This idea of using property that is legally owned by someone else goes back to the origin of trust law, but how does all of this apply to you?
Imagine your living trust as an open box. Into this box you can place most of your property, including your home, and other real estate that you own, your vehicles, your bank accounts, other investments, and just about any other assets that you own. Since this box is open, you can put in what you want and you can take out what you want. You can spend it, give it away, invest it, and otherwise use it as you see fit, just as you did before you put it in the box. You are completely in charge of your assets as long as you are alive and competent to manage your property. But what happens if you become unable to manage, or when you die?
“The difference between a will and a trust is that a will operates only from the moment of death, while a trust operates in the present.” - Black’s Law Dictionary
How Does a Living Trust Work?
How does a Living Trust fix all that?
You, the Trustor, create the trust, during your lifetime (that's why we call it a Living Trust). The Trustor determines the rules of the trust, and places assets into the trust. For a married couple, typically each will be a Co-Trustor. When you set up your trust, you also include detailed instructions in it. So, imagine when you are placing all your property into the box, you also drop in the box a list of instructions which say, “When I die or otherwise become incapacitated, this is what I want to happen and this is who I want to be in charge.” With these instructions in the trust document, your wishes are guaranteed.
Does a Living Trust give away your assets before you want it to be done?
Not one penny. When you as the Trustor set up the Living Trust, you also name yourself as the Trustee, the person in whom the ownership of the assets is placed. For most married couples, each spouse will serve as Co-Trustee. For the rest of your life, you (and your spouse, if you have one) act as the Trustee, controlling the assets in the exact same way you did before you ever created your trust, meaning these assets are still very much yours, under your control, to do with them as you wish. But in the instructions you have left for the trust, you also name Successor Trustees, which are most often children or other trusted family members, but your Successor Trustee can really be anyone you choose. Successor Trustees only take over at the point you stipulate in the trust, whether it be death or incapacity.
How will the Trust handle my assets after I am no longer in control?
The Successor Trustees must follow the instructions you have left for them, which provide that your assets are to be used for your benefit as long as you are alive. After you die, the Successor Trustees are required to distribute your assets as you specify among your Beneficiaries, those who will enjoy the income and assets of your trust. Distribution can be as simple as you wish, or as complex as you require, but no matter the stipulations, your assets pass from the trust to your Beneficiaries without intervention from the court system or from any outsider. This means there's no conservatorship if you become incapacitated, and there's no probate after your death. Your trust is fully customizable to meet your wishes.
Without a trust, no one may have the legal right to manage your property if you become incompetent or when you die. If you have left a will, after your death the will must be probated in order to give it authority, which takes a great deal of time and money. If you have a stroke or otherwise become incapacitated, but remain alive, no one can touch your property until you have been ruled incompetent in a court proceeding, called a conservatorship, which will stretch on until you die, requiring accountings each year, which must be approved by the Court, meaning your assets will be used for these costs, with the added insult of still requiring a probate proceeding to distribute your assets once you pass away.
On the next page, we'll discuss just who needs a Living Trust.
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