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Wealth Management - December 2017

by Stacy Wise | Dec 19, 2017

Why Living Trusts are Important

By Rick Imhoff, CFP ®

There are many excuses as to why some of us do not consider a revocable living trust as the primary document to manage and settle our estate.  Some of us don’t think we have a large enough estate to benefit from a revocable living trust, especially with the recent significant increase in the estate tax limit.  Some of us don’t consider a trust-centered estate plan as it typically costs more than a simple will and will substitutes.  There is also the additional time required to retitle most or all our assets in the name of the trust.  Despite all the excuses, the biggest benefit of a revocable living trust is what it can do for you during a period of incapacity.

One of the biggest estate planning issues today is planning for incapacity, which can come in the form of a mental incapacity, such as Alzheimer’s, or in the form of physical incapacity, such as from a stroke or accident.  Whatever the incapacity, you may have difficulty in handling your financial affairs and need help.  For assets held in your sole name, and possibly certain jointly held assets, you basically have three options.

One option is to do nothing, which means the probate court will appoint someone to take care of your money and be under the supervision of the probate court.  This is usually not desirable as you no longer have control over your financial affairs.

Another option is to execute a financial durable power of attorney where you would name an agent to handle your affairs.  With this option, you are trusting your agent to do the right thing and hope they will handle your financial affairs in a manner as you wish without court supervision.  However, they can do whatever they feel is appropriate, which may not be what you would have done.  Even if your agent does the right thing, he or she may have difficulty in conducting business for you because many people are very cautious to work with an agent acting under a durable power of attorney.

The third option is to establish a revocable living trust and retitle most or all your assets in the name of your trust.  In nearly all instances, you name yourself as the trustee, so you can continue to conduct your financial business as you do today.  In the event you become incapacitated (as you would define it in your trust agreement), the successor trustee would become the acting trustee and handle the management of all the assets held in your trust, pay your bills, and handle other financial matters for you as you direct in the trust agreement.  All this would occur without court intervention.

By placing your assets in a revocable living trust, you provide important protection for your assets during incapacity, have your affairs managed in a manner you desire, and maintain privacy by avoiding probate.  As with any aspect of structuring an appropriate estate plan, you should consult with an attorney, preferably one who specializes in family law and estate planning to get the proper legal advice geared to your unique situation.
 

Rick Imhoff, CFP®, is Senior Vice President & Senior Trust Officer for MidAmerica National Bank. He can be reached at 309-647-5000, ext. 1130 or by email.

Investments are not FDIC-insured, hold no bank guarantee, may lose value, are not a deposit, and are not insured by any federal government agency.

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