What are Living Trusts?
Most people have heard the term "living trust" but it is sometimes a commonly misunderstood legal arrangement. You may have heard that Living Trusts are an alternative to a traditional will - because it allows families to avoid going through the probate process upon the death of a loved one. Bucky Highsmith, an estate attorney and partner with the Stewart Melvin & Frost law firm in Gainesville, Ga., answers questions concerning a living trust. And why is there so much confusion surrounding this legal strategy, especially here in the state of Georgia?
Question: What exactly is a living trust?
Bucky: A living trust is basically a document prepared by a lawyer that requires all your assets to be transferred into a trust, or ownership of the assets would be transferred to the ownership of a trustee. That trustee would hold your assets for your use and benefits for the rest of your life. And at your death, the terms of the trust dictate where those assets go.
Question: A living trust sounds very similar to a will?
Bucky: It is very much like a will. It is almost identical except that a living trust would become operative during your life where as a will becomes operative only at your death.
Question: Is it preferable to set up a living trust for your estate instead of a will, so that your heirs avoid having to go through the probate process?
Bucky: The big selling point is the avoiding of probate. That is very important if you live in California, Florida, New York or a number of other states. Avoiding probate is not so important in Georgia. It is not as expensive or difficult as in other states. But avoiding probate is the main reason why people set up living trusts. They create this living trust arrangement in their lifetime in order to avoid the probate process at their death.
Question: If avoiding probate is not an important objective for most of us here in Georgia - and if the main purpose of a living trust is to avoid probate - then is there any good reason for anyone in this state to have a living trust?
Bucky: There are very few advantages in the state of Georgia. We have to go back to our 11th grade Government class to remember that every state has a different set of laws. The laws on burglary are not going to be the same in Montana as they are in Georgia. It's the same thing with probate laws. While the probate process is difficult in some states, it does not mean it is difficult or expensive in Georgia. In fact, the AARP has recognized that living trusts for probate court avoidance is not a good idea in Georgia.
But there are a few good reasons to use a living trust.
No. 1, you are an older person who is starting to worry about your mental abilities and are concerned about being taken advantage, for example, a scheme to swindle you out of your money. A living trust would protect you in that situation. Your assets would be locked up and a trustee would have to give permission for those assets to be distributed.
Another reason might be in handling real estate you might own in another state that has bad probate laws. There would only be a small handful of Georgia citizens who have those kinds of reasons to set up a living trust.
Question: We also hear a lot about living wills - are there any similarities to a living trust? What is the difference?
Bucky: A living trust is an asset management and asset distribution tool. A living will, on the other hand, is a term used for a document that allows you to express your wishes concerning medical care, life support decisions, and issues along those lines.
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