Living Trusts vs. Testamentary Trusts
Cleveland, Ohio Estate Planning Attorney Dan Baron:
If you’re planning for your Ohio estate plan, then you’re probably lost among the many estate planning terminologies. However, there are numerous estate planning methods to provide safety and security for your family. There are many ways to achieve this including living trusts, testamentary trusts, wills, legacy trusts, power of attorney’s and more. If you have minor children (under the age of 18) it is often suggested to implement a testamentary trust into your last will and testament. How is this different from a living trust you ask? Here ‘s some additional insight…
First, if you’re trying to decide between a trust or a will, please see this link. However, if you have children, a testamentary trust is often recommended for your estate planning needs. A testamentary trust is created in your last will and testament. Thus, unlike a living trust, a testamentary trust will not take effect until you die. The terms of the trust are amendable and revocable – they can be changed at any time. It is highly recommended to include a testamentary trust in your will for parents who are at risk of dying at the same time.
Example: Husband and Wife have $1,000,000 in assets including a house, stock, and automobiles. Both Husband and Wife die in a car accident and leave behind three children ages 4,6, and 11. Because their children have not reached the age of 18, they may not have a claim to the money until they reach the age of maturity – age 18.
A testamentary trust can help avoid the scenario above. Through the trust, you may set parameters on your estate. For example, you might include terms that allow for $1,000 a week to be given to your children in the event both parents pass. Or, you might hold off on giving your children any money until they reach the age of 21, 25, attain a degree, get married, etc. Having a testamentary trust allows you to control your estate even after your death. Note however that if only one parent dies in the example above, the testamentary trust does not take effect. Instead, most often times the dying spouse leaves all of the estate to their spouse. In that instance, the remaining spouse would determine how and when the money is distributed among the children. Side note – you cannot disinherit your spouse…
Contrary to a testamentary trust, a living trust – or inter-vivos trust – takes effect at its creation. These trusts can be either revocable or irrevocable. Inter-vivos is Latin for “among the living persons.” So, if I were to decide to give you my boat, then that would be an inter-vivos transfer. Typically, a living trust must contain a trustee (a person responsible for carrying out the wishes of the creator), and a beneficiary (the persons receiving the benefit of the trust). In Ohio, you as the creator of the trust may not be the beneficiary of the trust unless you elect to set up an Ohio legacy trust. Put simply, a living trust is one that is created during your lifetime. Living trusts are often recommended for those who wish to avoid probate or want to keep their assets private.
For more information, contact Cleveland, Ohio estate planning attorney Dan Baron at Baron Law LLC. Baron Law is a Cleveland, Ohio are law firm practicing in the areas of estate planning, divorce, business law, and securities litigation. Contact an trust attorney at Baron Law today at 216-573-3723. You will speak directly with an attorney who can answer all your trust and estate planning questions.