One of the advantages of marriage over a cohabiting relationship is that a spouse in a marriage is a legal heir, and has a legal right in Georgia to inherit, with or without a will. The only way cohabitants can inherit in Georgia is through a will or through a living or testamentary trust.
Trusts are rights and properties held by one party for the benefit of another. There are many reasons for a cohabitant to enter into a trust agreement. These include maintaining control over assets, avoiding probate, and avoiding inheritance taxes. A testamentary trust is a trust created by a will or a living or an inter-vivos trust document. A testamentary trust does not have the tax advantages of a living will, but does allow the beneficiary to use the property during his or her lifetime. The remaining principal or corpus would go to a second person after the beneficiary’s death. A living trust is a written agreement in which a trustee agrees to hold assets contributed by the grantor for the benefit of third parties or beneficiaries. In some states, but not all, the trustee, grantor, and initial beneficiary may all be the same person. A will or a testamentary trust becomes effective only upon the death of the testator. However, a living trust becomes effective immediately. As long as a living trust is not irrevocable, it can be amended or revoked at any time, and the grantor retains absolute control over the assets transferred to the trust, if he is the trustee. At the time of the grantor’s death, the living trust either becomes irrevocable or it terminates with the trust assets going to designated beneficiaries, or it continues to stay in existence, with the trustee continuing to hold assets for the benefit of the remaining beneficiaries. It is one way to avoid the expense of probate.
There are both disadvantages and advantages to wills and to living trusts. Some of them are as follows:
• Privacy – A will, when it is probated, becomes public knowledge, as do the assets listed under the will. A living trust, unless there are extraordinary circumstances, never becomes public; thus, neither the assets nor terms of the trust become public record.
• Probate – In order to be enforced, a will must go through a form of probate procedure in the court system for which there are fees, usually based on the size of the estate and possibly on the identification of the beneficiaries if they are minors (since guardians may have to be appointed; however, see below). Beneficiaries normally cannot receive the bulk of the assets until probate is completed, which could take a year or more. With a living trust, probate is avoided, and trust assets are distributed almost immediately by the trustee to the beneficiary.
• Complexity – A living trust agreement is more complex in that the assets, while the grantor is alive, must be transferred to the trustee and held in the name of the trust. The trustee is the one who distributes the assets and income and manages the corpus (the body) of the trust. A will, however, takes effect only upon the testator’s death, and is usually less expensive to draft and to change than a living will. However, as stated above, probate is more expensive to hold property.
Another method of estate planning for cohabitants is through joint tenancy, where title to either real or personal property is held jointly. The joint tenants own equal shares and jointly own the property. Each joint tenant may sell his or her one-half interest. However, when one dies, the remaining owner automatically takes over ownership as a right of survivorship.
Tenancy in common is a way for two or more people to hold property. Each has the right to bequeath or sell his or her share of the property to someone other than the co-owners. It is often also easier to sell an interest as a tenant in common rather than as a joint tenant. At the tenant’s death, his interest passes either through his will, through a living trust, or by intestacy.
Each of these Georgia estate planning techniques should be considered by a cohabitant, in that each has its own pros and cons and every case is different. Having no method of estate planning is a disaster for a cohabitant, because the intestacy laws of Georgia will not allow the cohabitant to receive any of the estate. Thus, it is essential for a couple living together to meet with a Georgia estate planning attorney to discuss estate planning, living wills, and durable springing powers of attorney so that they can fully understand their rights and obligations and can deal with these problems in a way that is suited for their personal needs at a time that is not pressured or emotionally chaotic.
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