Whether you have already retired or are still planning for that phase of your life, you probably want to keep control of your money throughout your retirement and then pass your assets on to your loved ones. Living trusts, or “loving trusts”, as they are sometimes called, can help you achieve both of these important goals without giving up control of your hard-earned assets.

Like a safe deposit box, a living trust holds your assets such as investment securities, real estate, and other valuables, but you control the contents as long as you live. You can name yourself or arrange to have someone else as trustee, and you can revoke the trust or change its terms whenever you desire.

A resource during retirement. A living trust may be useful if you want to enjoy retirement without spending a lot of time managing money. One option is to name a financial services firm as trustee and assign it responsibility for managing your investments and providing regular distributions to you according to the guidelines you set. Or if you prefer, you can personally manage the assets in your trust. Either way, you maintain your financial independence during your retirement years.

An estate planning tool. At your death, a living trust becomes irrevocable to ensure that your loved ones receive assets according to your wishes. Your trustee distributes your assets per your instructions—bypassing probate court proceedings. By avoiding court involvement, the trust may help your heirs save attorneys’ fees, reduce delays, and avoid public scrutiny.

The following benefits are additional advantages of a living trust.

• Provides possible reduction or elimination of estate taxes. A living trust by itself is not a tax-saving device, as the assets in your trust will be included in your estate for tax purposes. However, your attorney can provide more information about how you can incorporate two-part marital provisions to take advantage of each unified credit for married couples, thus saving taxes.
• Manages assets under one plan. If your assets are currently scattered and financial record-keeping is a nightmare, you may enjoy the ease of managing assets under one plan so that paperwork is minimized. (This may be especially effective if you own real estate in another state.)
• Is relatively affordable to establish and maintain. Although a living trust has initial and possible ongoing costs, they may be lower than the costs of a potentially lengthy probate process at your death.
• Manages assets if you are incapacitated. Because your instructions about who will manage your finances are spelled out in the terms of your trust, you have already delegated authority over assets in the trust. This may avoid having a court make decisions for you if you are incapacitated.
• Maintains control of assets to beneficiaries. If you are concerned that beneficiaries may be too young or irresponsible to manage their share of your assets, you can set the terms about how or when they receive their distributions.
• Provides peace of mind. A living trust will provide reassurance that your assets will benefit you during your lifetime, and you will be able to leave a legacy for your family on your terms.

You have worked hard for your money. If you wish to enjoy your assets through retirement and provide for your heirs after you’re gone, a living trust may be an option for you. To explore the idea further, consult with an attorney and a financial adviser.

Your home as a retirement asset
Stay put. Sell it and move. Remodel. Leave repair problems behind and move to rental housing. Are you wondering how your home fits in with your retirement plans? There are many ways to put this valuable asset to work during your golden years—some you’ve no doubt considered and some that are available thanks to new financial products or tax laws. Consider these ideas.

Keep your home and burn the mortgage. Many Americans pay off their mortgages by the time they retire (or close to it), which gives them considerable financial flexibility. With no monthly house payments, your cost of living may decrease dramatically. That means you can maintain your current lifestyle in retirement on less income—or, if your income stays the same, you’ll have more money to invest or spend.

Downsize to a smaller home and pocket the profit. Selling your home and buying a smaller, less expensive one may help you be mortgage-free even earlier (and perhaps provide you with a pocketful of cash). In addition to costing less up front, a smaller house may have lower property taxes, utility bills, and repair costs, as well as require less work to clean and maintain.

And thanks to the Taxpayer Relief Act of 1997, much or all of the capital gain from your home’s sale may be tax-free. Married taxpayers filing jointly can exclude up to $500,000 in capital gains, and unmarried taxpayers can exclude up to $220,000 in capital gains when selling a home that has been their primary residence for at least two of the five years prior to the sale. The exclusion can be used on a continuing basis but not more frequently than once every two years.

Sell your house and rent. Home ownership has advantages, but so does renting—especially in retirement. Up front, selling and renting may provide a big, tax-free profit that you can invest and tap when you want. Renting a residence may also offer other advantages.

• Your up-front investment is much less—usually limited to a damage deposit and perhaps an extra month’s rent payment.
• Your overall housing costs are fixed for the term of the lease, which helps you budget for expenses.
• Time and effort to maintain a rental home are usually less than for a house.
• Although you’re not building equity, you won’t lose it in a down real estate market.
• When your lease is up, you have more flexibility to move—without the hassle, cost, and potential delay of selling your home.

Of course, renting has disadvantages as well, including that your monthly payments aren’t building equity, and you may be vulnerable to rising rental rates.

Tap your home equity with a reverse mortgage. Retired homeowners who could use extra income may be able to tap their home’s equity through a reverse mortgage. Available to people age 62 and older who have paid off all or most of their mortgage, reverse mortgages are loans that provide cash based on your age and the equity in your home (the older the borrower, the larger the percentage of the home’s value that can be borrowed). Lending institutions offer several types of reverse mortgage programs, the most popular being the Federal Housing Authority’s Home Equity Conversion Mortgage.

As you can see, your home is a flexible asset in planning your retirement finances.