Kappa Alpha Order - Educational Foundation

There seems to be quite a bit of discussion these days on the subject of a living trust as an estate planning tool. But what is a living trust? What are its advantages? And how can a living trust fit into your estate plan? Here are some answers.

A living trust is an arrangement you create during your lifetime to provide for yourself and your family both before and after your death. It has built-in flexibility that can work very well with your overall estate plans. Though there are many advantages to using this estate planning tool, it is not a substitute for a will.

Looking at Both Sides

Reduction of probate costs. Although you can enjoy the use of the assets you place in a trust during your lifetime, a living trust removes those assets from your estate for probate purposes. Therefore, you save the probate and administration costs you would incur if those same assets were distributed by the terms of your will.
Speedy distribution of trust assets. By establishing a living trust during your lifetime, you are setting up a method of managing and distributing your assets. Because a living trust escapes the probate process, the plan of distribution you describe is set in motion immediately at your death. There are none of the delays that occur under distribution by will.
Flexibility of planning. Another advantage of a living trust is the overall flexibility it provides. Most living trusts are revocable. This gives you the freedom to amend, add to or even completely revoke the trust agreement as you wish.
Freedom of control. Living trusts give you the freedom to name both the beneficiaries and the trustee. Most likely you will name yourself as the trustee during your lifetime and maintain the right to appoint and select successor trustees and beneficiaries. You also control the income and principal and how much of it you wish to use during your lifetime.
Investment management. You may choose to appoint a professional trustee such as a bank trust department or trust institution; some charitable organizations also will serve as trustees. This frees you from the worry of the day-to-day management of assets, yet you still may direct investment goals, including instructing your trustee to change investment strategies.
Confidential trust terms. One of the most favorable aspects of a living trust is the privacy it allows. Unlike a will that is open to the public after you are gone, no one needs to know the contents of your trust, except your beneficiaries.
Charitable contributions. Charitable contributions may be made easily with a living trust. Once your needs and those of your family are met, trust assets can be distributed to Kappa Alpha Order Educational Foundation.
Tax savings. A living trust may be drafted to make the most of estate tax advantages afforded under federal law. After your lifetime, the value of the assets distributed immediately to us completely avoids estate tax.

Keep in mind that there's no income tax charitable deduction when you create a revocable trust, and the level of income is not guaranteed. The trust's assets can be invested in highly rated securities, of course, but the yield is dependent upon economic and market conditions. From your standpoint, these drawbacks may be more than offset by your right to retain control of the trust terms and investments.

A living trust generally is not a stand-alone estate planning document. It is advisable to have a pour-over will to capture any assets not transferred to your revocable trust, since it is difficult to get every asset into a trust.

A living trust gives you flexibility while you receive income from your assets during your lifetime, and it can provide asset management after your death.

Please contact Erik Showalter at 540-460-1401 or 540-463-1865, or via e-mail at eshowalter@ka-order.org, for more information.


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The information in this Web site is not intended as legal advice. For legal advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income tax include federal taxes only. Individual state taxes and/or state law may impact your results.

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