A living trust can make it easier for your family to manage your estate after you die. But, before you consider setting one up, it is important to understand the process and its benefits.
The primary benefit is avoiding probate, the expensive and time-consuming legal process that follows your death to tie up loose ends and distribute assets.
Determine Your Needs
There’s no hard-and-fast rule as to who does or doesn’t need a living trust. However, a living trust may be the right choice if you have a complex estate, family dynamics, or own property in multiple states. It can help avoid probate, protect your privacy, and help you save on taxes.
California living trust can also save your heirs from the costs of a will contest. A lawsuit filed by a disgruntled heir can eat into the value of your estate, which could mean less money for your loved ones. However, a living trust can make it harder for someone to challenge your estate plan after death.
In addition, a living trust bypasses probate for assets it holds. You should still create a will to designate a guardian for minor children and transfer any assets not stored in your faith. Your lawyer can advise you on how to structure your living trust. You can also visit an online will-maker service to get started on a revocable or irrevocable living trust.
Determine the Type of Trust You Want
A trust is a legal entity that you establish for estate planning purposes. You assign a trustee to manage your assets in the faith until you die or otherwise transfer them according to your wishes. A revocable living trust allows you to retain control of your assets while you’re alive, while an irrevocable trust can’t be altered once it’s established. You must “fund” your confidence, which means transferring assets into it so that they’re no longer in your name (but still your property).
A revocable living trust helps you avoid probate, the time-consuming and expensive process by which executors settle a deceased person’s debts and distribute their remaining estate according to their will or the law. You can also create a trust to reduce or avoid taxes, though a lawyer’s guidance is typically required.
Most people create revocable living trusts for simplicity and to avoid the cost of probate. However, a living trust can also help if you have a complicated family situation or own property in multiple states. In that case, you may need a more complex trust to meet your goals.
Transfer Your Assets
Once you’ve settled on the terms of your trust with an attorney, it’s time to transfer your assets into it. It means changing legal ownership from your name to the trust’s (your successor trustee will ensure that all your assets are transferred upon death).
Depending on the type of asset, this may mean getting a new deed for real estate or completing a form transferring bank accounts. You’ll also want to change the beneficiary designations on your life insurance policies to include your trust.
Other types of personal property you may want to transfer into your trust include artwork, collectibles, antiques, jewelry, and other valuables. If you share these items, you must create a Transfer Document listing each item you wish to add and its value. Your attorney or financial adviser can help you with this process. You should also consult your state’s laws regarding transferring tangible personal property into trusts. Some states require you to record the transfer, while others may not. Regardless, it would help if you had your successor trustee review the documents regularly to ensure everything stays up-to-date.
Name a Trustee
A good living trust lawyer can explain how to create a revocable living trust that fits your needs. In a typical trust document, you name a successor trustee to manage your property during incapacity and after death. You may also allow beneficiaries to add or remove trustees. In addition, you may decide to include provisions for trustee compensation.
Your trustee is in charge of paying your bills and distributing property to heirs. The person you choose must be trustworthy and up to the task. Many people choose family members as their successor trustees. However, consider naming co-trustees or hiring a professional if you are concerned about squabbling among family members.
If you name a professional trustee, ensure the trust agreement gives them the authority to seek legal and financial advice. A trustee who cannot properly administer your trust could lead to costly mistakes. Moreover, you should provide that the trustee has to report any conflicts of interest. It would help if you were also sure to identify the assets you are transferring into the trust.
A living trust can include most assets, including real estate, cash, and bank accounts, personal property such as jewelry, stamp or coin collections, antiques, artwork, and stocks. It would help if you transferred these properties’ titles or deeds into your trust’s name.
When you die, you must determine whom you want to receive the trust property. These are called beneficiaries and can be individuals, trusts, or charities. The beneficiaries of your faith can be the same as or different from those on your insurance policies and retirement accounts.
It is a good idea to name alternate beneficiaries for each primary beneficiary you select. These are the people who would get your trust property if your primary beneficiary dies before you do.
You must review your beneficiaries regularly as life events occur, such as births, marriages, and divorces. You also may need to change your successor trustee or the terms of your trust. If you change your beneficiaries, remember to update the beneficiary designations on all your accounts and any deeds or titles you have transferred to your living trust.