Planning Strategies

Important protections for your assets, life, and business may come into play during your lifetime.  Living trusts are a tool often used by estate planners in many estate plans.  Durable powers of attorney should be a part of all estate plans.  This page describes living trusts and durable power of attorneys and the advantages of each.

Living Trusts

Historians have traced the origin of trusts to medieval England when the Crusaders asked trusted friends to manage their estates in their absence.  The modern equivalent of this strategy in the United States the, funded living trust, is widely used by "well planned" individuals.

It is a common misperception that the revocable living trust, also known as an "inter vivos" or family trust, is only appropriate for those who are quite wealthy.  Such a trust need not be overly complex or expensive to establish and maintain.  Essentially, it is a contract entered into by the trust's creator (the grantor) and its initial trustee for the benefit of one or more trust beneficiary.  Under a "self-declaration of trust", the grantor is also the initial trustee and the initial trust beneficiary.  Typically, living trusts are initially funded with only a nominal amount of assets.  Then, whenever the advantages of funding the living trust outweigh the disadvantages, as outlined in the chart below, the trustee is made the owner of selected assets.  Advisors usually begin urging individuals to fund living trusts after they reach about age 55, when they begin to experience health problems or as assets are identified for which the probate process would be especially costly or troublesome.

Creating and funding a living trust has no gift or estate tax consequences because the grantor is treated as retaining control of the assets placed in the trust, even if he is not its trustee.  The trust's income also is taxed to the grantor, so it does not create income tax benefits.  Therefore, such a trust is essentially an asset-management device.

State laws differ regarding the use and treatment of living trusts.  Accordingly, you should be sure to have a knowledgeable estate planning attorney draft such a trust and advise you regarding its funding.

Durable Powers of Attorney

A "durable power of attorney" designates someone who is given broad or narrow powers to handle your business affairs or make healthcare decisions on your behalf if you become unable to do so.  Since disability is more of a danger than death for most of us, this is a very important estate planning strategy.

Funded Living Trusts





A trustee, other than the grantor, can manage assets in the trust whenever the grantor is unable to do so. This can avoid the need to have a court-appointed guardian handle these assets.


Assets in the trust do not pass through probate following the grantor's death, thereby avoiding the costs, delays and public scrutiny that can arise during probate. This can be especially advantageous when property owned in a state other than the grantor's state of residence is held in the trust, thereby avoiding the extra costs of "ancillary" probate proceedings in that state.


Assets must be titled and maintained in the name of the trustee.


Some additional costs are involved in maintaining a funded living trust, especially when the trust's grantor does not also function as its trustee.


Many, but not all, states recognize the validity of a "springing" power of attorney that becomes effective upon the occurrence of a specific event, such as the decisions by one or more physicians that you are not competent to handle your own business affairs. While such a delay in the effectiveness of a power of attorney may seem comforting when it is being granted, a springing power can create problems. For example, physicians may differ on their interpretation of "competency".

A durable power of attorney for property is not a substitute for a funded living trust. Using both strategies is usually advisable, with property located outside your state of residence and other specific assets being retitled in the name of the trust and all other assets being subject to the provisions of a durable power of attorney for property.

Such a power allows someone you designate (called your agent-in-fact) to act on your behalf with regard to decisions about medical treatment, drugs and medicine, or artificial means of sustaining life. This person also can be empowered to obtain medical records, sign waivers and releases, and consent to disclosures about your medical history.

This power of attorney is much broader than a "living will", which provides directions to a healthcare provider that apply when death is imminent except for death-delaying procedures. Moreover, a living will does not allow the removal of a feeding tube even if the patient has virtually no chance for recovery. A durable power of attorney for healthcare can give the patient's agent-in-fact the power to request all death-delaying procedures be withdrawn, including a feeding tube.

State laws regarding the use of durable powers of attorney and living wills are continuing to evolve. Consequently, it is very important that the attorney who drafts either of these documents for you be very knowledgeable about the current state of the law in your state and any other state in which you may spend a significant amount of time. In general, however, you will want to have either a durable power of attorney for healthcare or a living will, but not both.





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