By the time successful individuals retire, they have usually acquired a sizable investment portfolio -- stocks, bonds, mutual fund shares, real estate, a tax-deferred fund, shares in a closely held business. . . . While such assets can all but guarantee a financially well-off retirement, they can also assure the retiree of a considerable management burden.

For that reason, a successful individual nearing retirement needs to consider carefully how to best manage his or her finances in the future. This is a question that cannot ignore the long-term possibility of declining health. The financial management that may be no problem for someone who is under age 70 could become increasingly difficult in later years.

From a happier perspective, retirees with ample income generally travel frequently and may divide their year between two homes. Such travel can complicate investment decision making and cause costly delays. Financial affairs may also simply demand more time and energy than a well-off retiree cares to give them.

Many retirees resolve the question of future financial management by using a professional manager to protect their assets and gain freedom from the time demands of investing. That is easily possible through a simple investment management arrangement, but using a Living Trust can be a more desirable choice. With a Living Trust, an individual gives a professional trustee full-time responsibility for the care of any assets that are placed in the trust. The trust is normally made revocable. So, the grantor (retiree) can cancel or change it at any time and for any reason.

A Living Trust assures continuous professional management of the assets that are placed in the trust, yet the retiree can retain overall financial control. As the trust's beneficiary, the retired individual continues to receive income from the trust assets. The trustee is responsible for investing the trust assets and for all the recordkeeping that involves. And the trustee will continue managing the trust assets no matter what the state of the retiree's health may be or how available the individual may be.

The trust document specifies the terms of the trustee's management responsibility. The trustee may have full investment responsibility to follow the overall investment goals that the retiree establishes for the trust. Alternatively, the retiree can remain more closely involved as co-trustee with the professional manager and make final decisions on investment changes with the professional co-trustee. With a co-trustee arrangement, the trustee can take full responsibility quickly if the retiree becomes disabled or seriously ill at any time.

The trust's assets will pass directly to a successor beneficiary after the retiree's death. The successor beneficiary is often the retiree's spouse, but it can be anyone else the retiree names. Instead of passing the assets to another beneficiary, the retiree can choose to have the trustee continue caring for the trust assets during the life of a surviving spouse.

To save estate taxes, an individual has to give up assets permanently. An irrevocable trust is one way of accomplishing that. But a normal revocable Living Trust has no effect on estate taxes. After the retiree's death, the assets in a Living Trust become part of the retiree's taxable estate because the retiree had full access to those assets and could have revoked the trustee's control anytime. A Living Trust also has no effect on income taxes. The income from a Living Trust is generally taxable to the beneficiary.

Emily S Hazlett is Vice-President:Investments at ENB Insurance Agency, Inc. a wholly owned subsidiary of Evans National Bank.

Our firm does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences.