A living trust is one legal document in your estate plan. It is a document that allows you to pass your assets to others after you pass. Setting up a living trust offers many benefits to your family, including:
- Providing for your minor children if something happens to you,
- Setting aside money for your grandchildren’s college education, and
- Avoiding probate court. This can be particularly important because if you do not have a trust, your estate may go through probate proceedings where it could be subject to court supervision for some time.
Going through the initial stages of setting up and funding your trust can take six months or more, so it is important to give yourself enough time to make sure the paperwork is completed properly.
It’s never too early to set up a trust, but there may come a time when it is too late. You need to be of sound mind to sign documents and transfer property. If you receive a diagnosis of
Steps for creating the living trust
1.Decide what kind of trust you want to create
There are two types of trusts you can create – a revocable living trust and an irrevocable living trust.
An irrevocable living trust cannot be changed. It is more or less set in stone when you create it.
A revocable living trust can be changed and is highly flexible, which is why many of my clients select this option. We do not know what will happen in the future, which is why this flexibility is especially important.
2. Determine what assets you want to include in the trust
When you create a trust, the first thing you will need to do is decide what assets should be included in the trust. You can add a variety of different assets, such as:
- The family home or
other real estateyou own
- Investment accounts, including stocks, bonds, and CDs;
- Personal belongings
- Life insurance payouts;
- Financial accounts, including bank accounts
As you age, you may gain additional property or wealth, which you can also transfer into the trust at a later date.
3.Select your beneficiaries and trustees
Once you know what assets you want to include in the trust, you must select beneficiaries for the trust. Beneficiaries can include family members, friends, or even charities.
When you select your beneficiaries, you should consider the purpose for the funds. Some of the most common trusts I see are created for parents to ensure their young children are cared for if the clients are no longer alive. The trust is set up to provide maintenance and support, but cannot be used for outlandish purposes.
If you have multiple beneficiaries with different needs, you can set up different trusts and trustees. For example, if you have grandchildren, you may decide to set up a trust for their college education. You may also have one or more pets that may outlive you, prompting you to set up an additional trust to ensure that Fido is cared for in her old age.
In addition to selecting beneficiaries, you will also need to select one or more trustees who is in charge of administering the trust. You may be the initial trustee, but you should also select one or more successor trustees who are capable of taking over this job if you are no longer able to do it.
I highly recommend that you speak with your trustee(s) regarding your wishes before naming them in the trust documentation. If your trustee is unable or unwilling to administer the trust, you can hire a professional company to act as trustee.
4. Transfer your property into the trust
Once you have put together the trust document, you will link your assets to the trust. A deed will be done, transferring your house into the Trust. You will take care of that at the same time as you take care of signing the Trust. You will also name the Trust as a beneficiary of assets like life insurance, retirement accounts
Finally, after you prepare your living trust documents, you should make sure the rest of your estate plan is in order.
5. Consider your other estate planning documents
When you create a trust, you are ensuring that your family will be cared for after you are no longer able to take care of them. You should also make sure that your family is able to take care of you by preparing your powers of attorney and a medical living will. These will allow your family to make important financial and health care decisions if you are not able to in the future.
This article is for informational purposes only and does not provide legal advice. If you are ready to set up a living trust, or have questions about your options, contact me today to set up an appointment.