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USE A LIVING TRUST TO AVOID PROBATE

How can I avoid probate with a trust? A living trust (revocable trust) is a written document that you create with the assistance of your South Carolina estate lawyer during your lifetime. You may choose to fund it during your lifetime, or leave it unfunded until your death. By "fund it," that means that you actually make it the legal owner of your assets. It is up to you to decide what assets to place in the name of the living trust. For example, you might choose to retitle your bank accounts, brokerage accounts, or even your house into the name of your trust. One common mistake many people make is to execute a revocable trust and then neglect to retitle their assets in the name of the trust. In order for your assets to be distributed in accordance with your wishes, they have to actually be titled in the name of the living trust. Typically, the title of the asset is legally changed from your name, John Doe for example, to John Does as Trustee of the John Doe Revocable Trust.

Your trust will contain provisions for management of the transferred assets during your lifetime and will include, as well, what happens to those assets upon your death. In the latter regard, it functions as a Will substitute. The trustee will administer the trust in accordance with its terms. Most often you, if you so choose, will be the trustee, although you can name a spouse, child or bank as a Co-Trustee. A living trust is revocable trust, meaning that you can end it or change it at any time. You, as the creator of the trust, reserve the right to amend it and alter the trust however you please and you can obtain access to all the assets at any time for any reason. Because you control everything in your trust, the trust does not protect assets from any creditor or nursing home.

Why Use a Revocable Trust

A living trust accomplishes three goals that many people have. First, those assets that you have transferred to the trust prior to your death will avoid probate. Upon your death, the successor trustee will do with the assets whatever the trust says. The bottom line is that upon your death, the trust serves as a Will to the extent that it has assets in it.

Second, you have managed to keep your affairs private. Unlike a Will which is a public document that must be filed with the Probate Court at death, a living trust is private and is not available for inspection by the public at your death.

Third, the living trust will ensure that your assets are managed for your benefit in the event that you become incapacitated. Should you become either physically or mentally disabled, then, if your assets are in a living trust, your successor trustee will continue to manage the trust and its assets in accordance with the terms that you established. There is no need to seek a conservator in the Probate Court

Should a Living Trust Be a Part of Your Estate Plan?

A living trust is just one option to consider in your estate plan. Revocable trusts are often overused when there are other options available to avoid probate or to guarantee that your last wishes are followed. You should never draft a trust without the assistance of a South Carolina attorney. There are many internet sites that offer trust documents that you can complete on your own. However, a living trust is a very important document that should never be drafted without professional assistance.

Here are the major issues to consider prior to executing a living trust.

First is the size of your estate. Usually a will is sufficient if your estate is under $500,000 and you are leaving everything to your spouse or your children.

Next is whether you have an extended family of children and step children. This is one of the most contested areas of estate planning. There are many cases where a party leaves all of their estate to the step parent. Then upon the death of the step parent, only their children are left any assets. One of the most common uses of a living trust or perhaps an irrevocable trust is to properly provide for the needs of the new spouse during their lifetime but to insure that your biological children also receive their share of your estate. 

Another consideration is whether you own a business or possibly real estate in another state. Placing your business in your living trust assures that the business, including any real estate owned by the business, is not tied up by the probate process which normally takes up to a year. The same is true for out of state property. A separate probate, called an ancillary probate, will be required in the other state. Placing that property in a living trust avoids another costly and time consuming probate action.

The bottom line is that there is no "one size fits all" in deciding whether it makes sense to have a living trust as part of your estate plan. You should only execute a living trust after a comprehensive review of your entire estate plan with a South Carolina trust attorney.

South Carolina Trust Attorneys

Wayne Patterson
South Carolina Trust Attorney
10 Century Dr. Suite B
Greenville, SC 29607
864-270-7973

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Duties of a Trustee

With a "Living" (or inter vivos) trust, the creator of the trust (often called grantor, trustmaker, or settlor) is usually the trustee. However, once the settlor passes, someone has to take over as the successor trustee. You must agree to be successor trustee. Even if you are named as the successor by the settlor, you do not have to accept. If you do agree, you are bound by the specific terms of the instrument and the South Carolina laws governing trusts and trustees.

Trusts have many uses from preserving a child's inheritance to providing for a disabled person in a special needs trust. As the trustee, your authority comes first from the trust document. Your duties and powers as described there are your basic instructions.

Generally speaking, you as trustee have three kinds of fiduciary duties to the trust and its beneficiaries:

1. A duty of impartiality (not to favor the interest of one party over another)

2. A duty of undivided loyalty (not to put your own interest in conflict with those of the trust), and

3. A duty to administer the trust with care and prudence.

A trustee must always act to further the interests of the trust and the beneficiaries. You shouldn't enter into a transaction where you might benefit at the expense of the trust. If a situation arises where there's a conflict between your personal interests and the trust or between the trust and the interest of third parties, you should always put the interests of the trust first.

You should not sell trust property to yourself or sell your property to the trust. You should not loan trust funds to yourself or members of your family. This applies not only to transactions in which you would deal directly with yourself, but also to transactions in which you as trustee would deal with organizations, such as partnerships or corporations in which you are personally interested. These rules apply even though the transaction may be scrupulously fair and even if it benefits the trust.

One essential fiduciary duty is to account to the beneficiaries of the trust. When you must provide an accounting may be in the trust document. By state law, you must account periodically, at least annually. At minimum your account should reflect in detail all item s of cash receipts and disbursements, proceeds from the sale of assets and distributions to beneficiaries. It should show opening and closing cash balances and must contain a list of the trust assets at the beginning and at the close of the accounting period. Be sure to list all assets received, held and disposed of, and all receipts and disbursements, giving the date, amount and explanation of each.

If the persons who receive income under your trust instrument are different from those who will receive the principal when the trust terminates, your records should classify all receipts and disbursements as income or principal. In most cases, this will not be difficult; ordinary dividends and interest are clearly income, proceeds from a sale of stock are principal. From records kept in the above manner, you or your accountant can draw information necessary to prepare trust tax returns, reports to your beneficiaries and reports to the probate court if your trust is under court supervision.

As a trustee, you are entitled to reimbursement of your reasonable expenses in the administration of the trust. Normally, you are also entitled to a reasonable fee for services performed, but you 're not required to take one. If you do, add this to your other income on your personal income tax return.

YOU SHOULD NOT:

a. Speculate with trust assets in the hope of making big profits

b. Lend trust money to yourself, no matter how good your security, buy trust assets for your own account or engage in other forms of self-dealing

c. continue to hold an investment which no longer meets the "reasonable man" standard

d. continue to hold assets transferred to you as trustee without an independent investigation of their quality as trust investments

e. delegate investment decisions to others

Courts are very strict with trustees. Sometimes the trust instrument grants you broad powers or purports to relieve you of responsibilities which you would otherwise have, but you still have a duty to exercise the powers fairly and prudently. You should attempt to carry out the intent of the person who created the trust if that can be determined from the trust instrument. You also must consider the assets of the trust, the amount of income, the needs of the beneficiaries and the various other demands the trust might be called upon to meet. As trustee, you can be held personally liable to the beneficiaries for any loss to the trust estate if you breach your fiduciary duty.

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