by Ira Brower~In an earlier Article I wrote concerning the “Sandwich Generation”, I briefly touched on a Standby Living Trust. Since this issue of FamilyAffaires.com is focused on Health Crisis, I thought it would be a perfect time to discuss the Standby Living Trust in more detail.
In order to understand what a Standby Living Trust is you first have to have an understanding of a Living Trust. A living trust is an agreement that is usually a part of your overall estate planning documents. I can’t stress the importance of engaging a qualified estate planning attorney to draft your estate plan. Even though you can go online to purchase canned estate planning documents, this is not something that should be done as a Do-it-yourselfer!
Trusts date back to the medieval days of Europe when barons and landowners would transfer their property in care of a trustee who had the responsibility for overseeing the management of the property while they went out on conquests and crusades. The same concept holds true today. Today a Grantor, the owner of the assets, transfers legal title NOT ownership to a Trustee, the individual or entity entrusted with the management of the assets and charged with following the terms of the Trust Agreement. The trustee has the duty to provide income and/or principal to the named Beneficiary. The Beneficiary can be the Grantor or others as provided for in the trust agreement. Depending upon the terms or the purpose of the trust, the Grantor has the ability to change, alter, amend or revoke the trust as long as he or she has the mental capacity to do so. That is why the Living Trust is also commonly known as a Revocable Living Trust.
Here are some of the reasons a person establishes a living trust:
- they want current as well as ongoing management of their assets
- they want uninterrupted asset management in the event of physical or mental incapacity
- they want assistance with providing personal services in the event of physical or mental incapacity
- they want uninterrupted management at death
- they want unlike a will which becomes public record upon death an agreement that remains confidential and not subject to public record upon death.
Many people are not ready to have a trustee help them manage their investments and other personal financial matters. Yet, these same people are very much concerned with who will help them manage their investments, pay their bills, take care of their income taxes. For example if they are faced with a health crisis either temporarily or permanently? I suggest that these people establish this same Revocable Living Trust agreement, except, instead of funding the trust with their current financial assets they fund the trust with a token dollar amount such as $10. Now, should that person become faced with a health crisis, become adjudicated an incompetent by a Court, or just get tired of managing investments because they would rather travel, they have this trust in a Standby mode waiting for one of these events to occur so the trustee can help immediately.
Some would ask, “Why do I need a Trustee because I have my spouse or a loved one to help me?” Just consider in a crisis situation your spouse or loved one is going to be faced with a difficult time and even in the best of circumstances will be focused more on the crisis than on the finances. Now, they would not only have to care for you, they would have to be burdened with handling the family finances as well as taking on the responsibility of investment manager, a job they may not be equipped to handle especially if you have always taken care of this.
Lastly, remember because this Standby Living Trust is revocable should you regain your health you can direct the Trustee to transfer the financial assets to your name, and, the trust again remains in a Standby mode.
You can always name your spouse or loved one as a co-trustee with the professional trustee. The professional trustee does all of the work in co-ordination with your spouse or loved one.