Many people do not understand what a living trust is. We get a lot of questions about what they are and how they work. Here are answers to a few questions we hear regularly.

Trusts

A Living Trust is similar to a Last Will and Testament, yet allows for the transfer of assets without the need for Probate or Estate Administration. Typically a living or inter vivos trust is created to avoid probate or at least to allow some property to pass outside of an estate. Many people use life insurance policies, or a combination of life insurance and trust instruments to do the same thing.

Avoiding probate can save thousands of dollars in an estate and can more easily distribute property and provides greater flexibility for the trustee or owner.

We have a friend who is a financial planner who has commented that many people postpone meeting with him because they think they need to have more money before they can invest. Postponing setting up a trust can be just as misguided. For a few hundred dollars, We could save your estate, and thus your heirs and beneficiaries, thousands.

How a Living Trust can help you and your family

One way to minimize probate is through the creation of living trusts.

A living trust facilitates the transfer of property from any person, trust or entity to any person, trust or entity while you are alive and is much easier to amend or revoke than a will. One example is a Life Insurance trust whereby the trust, and not a named individual, is the beneficiary of the life insurance proceeds.

Some of the ways an attorney can help with an estate settlement include: Gathering the estate assets, whether in a living trust or not; evaluating your estate planning documents and determine what is required; creating Trustee authority; determining type, character and value of each asset; determining allocation, distribution and division of assets, balancing document requirements, Trustee obligations and tax planning options; transferring assets according to the estate documents or requirements of state law.

Even with a solid estate plan and extensive trust management, probate is not always avoidable, nor should it be. A living trust will be able to minimize probate when the trust is settled.

Subsequent marriages, insurance and trusts

When a parent re-marries, it becomes more important than ever to protect life insurance proceeds designated for children. An occurrence that happens more frequently than might be expected is where the second wife changes the life insurance benefits to her name. If the re-married father and parent of children from a previous marriage dies, the second wife will receive all the benefits of the life insurance and none will go to help support the father’s biological children. When that wife dies, it is likely that the money will go to her biological children and the father’s children will again receive nothing. This was probably not what the father had in mind when he purchased the insurance and made the premium payments. Can anything be done to protect assets for descendants now? Absolutely.

How can you allow a portion of the money to be available for the benefit of a second or third wife and give part to your biological children? One way is through changes in the beneficiary designations. Although this can be difficult and some companies require the consent of the spouse, it is not impossible.

A better way is to set up a revocable trust. The trust can designate who you would like to receive the proceeds and how you want the money distributed. Even better, once you create the trust, you can amend it.

It is best to create the trust before you get married, and amend it when you choose. Call for a free consultation if you think this situation applies to you.

Small estates in Tennessee

Usually, when a person dies, the decedent's family must open the estate and go through probate court. Many states, Tennessee included, provide for an easier and quicker alternative for smaller estates.

Tennessee law, Tennessee Code Annotated 30-4-102, provides for simplified probate when the value of the decedent's estate, under most circumstances, does not exceed $25,000. TCA 30-4-103 sets out the process by which a small estate can be administered.

Among the many differences between opening a probate in the usual manner and filing an affidavit for a small estate is that the filing fee for the small estate affidavit is much less expensive.  Recent changes in Rutherford County have made filing for a small estate even more easy here.  

Revocable Trust

The revocable trust has become in Tennessee, as in many jurisdictions, the functional equivalent to a will in estate planning. It is, in effect, a will substitute with its primary goal as one of determining the persons to receive the trust property upon the trustor's death.

The rules for interpreting the disposition of one's property, then, are virtually the same, if not absolutely the same, as whether the person has chosen a will or a living (revocable) trust as that person's primary estate planning instrument.

Tennessee law (TCA 35-15-601) provides that the capacity required to form a trust is the same as that required to create a will and that a living trust is for the most part, the equivalent of the will.

Also, trusts are more flexible than wills and allow for the mention and reference to wills, codicils, and life insurance policies as part of its custody and control. Of course, the most obvious benefit is the ease by which it may be revoked or amended, as compared to the more formal requirements of the last will and testament.

If you are interested in having a Living Trust drawn up to make sure your family is protected then call our Murfreesboro, TN Law Office at 615-893-1239 to schedule a Free Consultation. We’ve helped many people with both Wills and Trusts and we can help you.