The recent, tragic passing of Robin Williams reminds us of just how fleeting life can be. The void in his loved ones’ hearts may never be filled, but the popular entertainer did take steps to care for them financially by engaging in effective estate planning. Among other acts, Williams reportedly created a revocable trust before he died.
Sometimes known as “living trusts,” a revocable trust refers to a fiduciary arrangement that you (the grantor) create during your lifetime. A living trust can help a grantor manage his or her assets, and protect the individual if he becomes ill, disabled or challenged as he ages.
During your lifetime, you (the grantor) may transfer property to the “living trust,” which will be administered by a trustee you have selected; and during that time he or she is generally responsible for managing the property as you direct, for your benefit.
Once you pass away, the trustee is generally obligated to distribute the trust property to your beneficiaries, or to continue to hold it and manage it for the benefit of the beneficiaries.
How Do Wills and Trusts Differ?
Although both a will and a revocable trust can provide for the distribution of property upon your demise, a revocable trust can also provide you with a way to manage your property during your lifetime. A revocable,
or “living” trust may also enable the trustee to manage the property and use it for your benefit, and your family’s benefit, if you become incapacitated. Of course, the trust must be adequately funded when you are mentally competent to be useful. If the revocable trust is properly funded and structured, it can help avoid the need for a court-appointed guardian, if you become mentally incapacitated.
Most revocable trusts will not help a grantor avoid estate tax, but they may help you avoid probate, which is generally not expensive in New Jersey but may still expose the will to public scrutiny.
Talk To Your Trusted Advisor First
In some circumstances, particularly when a special needs individual is involved, it may be advisable to establish a kind of irrevocable trust called a “Special Needs Trust.” An SNT may enable the grantor to ensure that his or her assets will enhance the lifestyle of the special needs person without impairing his or her ability to receive government benefits.
There are many issues to consider regarding the establishment of a trust, so before making a decision about setting up either a living trust, a will or another approach, it may be advisable to consult with your account and/or attorney, who can help you to consider the tax and other implications and the costs and benefits.