Kyle Wynn & Associates and its predecessor firm have provided estate planning services to clients for nearly forty 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? For many people, having an estate planning trust 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 and the 1536 document, the Statute of Uses. But how does all this apply to you?
Imagine your living trust as a box without a lid on it. Into this box you can place your house, your car, your investments and whatever other property you own. Since it doesn’t have a lid on it, you can put in as much as you want and you can take out as much as you want. You can spend it, give it away, invest it, and otherwise use it as you did before you put it in the box.
But why would you want all your property in a box? Because you will not always be able to manage your property.
“The difference between a will and a trust is that a will operates 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 box fix all that?
When you set up your trust, you put instructions in with it. You, the Trustor, create the trust, determine the rules of the trust, and place assets into the trust. More than one person can be a trustor, of course, like a husband and wife. So, imagine when you are placing all your things into the box, you also drop in 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 name yourself as the Trustee, the person in whom the ownership of an asset is placed. For the rest of your life, you act as the Trustee in the exact same way you would if you never put one thing into the trust. In your instructions for the trust, you also name Successor Trustees, often children or trusted loved ones, but it could be anyone you choose. Successor Trustees take over after a point which you stipulate in the trust, be it death or incapacity.
How will the Trust handle my assets after I am no longer in control?
The Successor Trustees have instructions of their own to follow called a distribution.
This is a part of your trust that you create which provides for your Beneficiaries, those who will enjoy the income and assets of your trust. A distribution can be as simple or as complex as you wish, but, no matter the stipulations, your assets pass from the trust to those Beneficiaries without court or outside intervention. And, yes, Successor Trustees can also be Beneficiaries. Trustors can be Beneficiaries too. A trust is fully customizable to meet your wishes.
Without a trust, no one has the legal right to manage your property if you become incompetent or even if you die. If you pass away and leave a will, 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, no one can touch your property until you have been ruled incompetent and a conservatorship has been set up, which has all the court costs of probate with the added insult of still requiring probate 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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