Living trusts are a popular tool for providing stand-by management for your personal affairs by a relative, close friend or local institution in case you become incapacitated and for sheltering the assets you leave from the cost and publicity of probate court.
A living trust is well suited to those purposes, but it doesn’t provide the tax-planning advantages or the high degree of asset protection of a Model Offshore Trust. On the other hand, a Model Offshore Trust by itself doesn’t leave room for a close friend or relative to act as Trustee (although such a person can serve as Protector or as a Supplemental Advisor).
The table below compares the advantages of a living trust, a Model Offshore Trust and a combination of the two. Fortunately, it is a not necessary to choose between a living trust a Model Offshore Trust. With the following steps, you can easily coordinate your living trust with a Model Offshore Trust, to gain all the advantages of both.
- Step 1. Include yourself in the Beneficiary Class of your Model Offshore Trust. Doing so gives the Trustee the authority to transfer money directly to you or for your benefit. If you ever become incapacitated, the Trustee can make transfers to your living trust. The trustee of the living trust then can use the money to pay your bills.
- Step 2. Name your Model Offshore Trust as a beneficiary of your living trust. You can do this when you establish the living trust or by making a simple amendment to the living trust you already have. At the end of your lifetime, all or part (as you determine by the terms of your living trust) of the assets of the living trust will pour into the Model Offshore Trust.
|Living Trust||Model Offshore Trust||Living Trust plus Model Offshore Trust|
|Avoids probate costs||Yes||Yes||Yes|
|Allows management of grantor’s affairs by relative or friend||Yes||No||Yes|
|Protects family privacy||Only during probate||At all times||At all times|
|Protects against creditors and lawsuits||Limited protection for heirs; none for Grantor||Strong protection for Grantor and Beneficiaries||Strong protection for Grantor and Beneficiaries|
|Income tax advantages for grantor||No||Achievable||Achievable|
|Income tax advantages for heirs||No||Substantial||Substantial|
|Estate-tax advantages for grantor||No||Achievable||Achievable|
|Estate tax advantages for heirs||No||Substantial||Substantial|
or… Start over with Model Offshore Trust
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