A trust is a living document or arrangement which allows a trustee to legally hold title to the property of another person or beneficiary.
A living trust, which is also called a Family Trust or Revocable Living Trust, is generally created by an estate attorney, and unlike a traditional will, which creates a testamentary trust after your have died, a living trust is created while you are alive and you will generally act as the donor, beneficiary and the trustee. A living trust can also be revoked or changed.
Living trusts take affect while you are alive and allow you to create a legal plan for your estate and determine who will make legal decisions for you if you become incapacitated from injury or disease. With the increase of complicated family structures, a living trust or an advanced revocable trust can also help make sure your dependent children from different marriages receive their proper inheritance.
Keep in mind, the trust will allow you to keep unlimited access to your assets while you remain living. After your death, the living trust will appoint a successor trustee who is ensures your assets and property are distributed appropriately.
The main benefits of a living trust include:
- The ability to designate someone to manage your property if you become severely incapacitated.Individuals who become sick or diseased or who are otherwise unable to manage their own assets may have to have a conservatorship or guardian appointed if they have not created a living trust. A living trust, if organized appropriately, can be a great tool to avoid this inconvenience. If you have not had your trust funded, make sure you appoint a durable power of attorney.
- A living trust allows you to avoid probate.If you have created a revocable living trust, the property contained in your living trust will not have to be probated. Your living trust can also remain private and does not have to be part of the public record. If your trust is not funded prior to your death, probate may be required.
- A living trust may reduce the delay in property distribution after your death.A trustee may act without court supervision after your death and proceed with the terms of your trust, avoiding delays generally caused by the probate process.
- Living trusts can also provide a complete list of your property and other assets.
If your estate is worth more than $100,000 or more you can generally benefit from having a living trust. The cost of probating a will for an estate of this size can range from 2%-4% of the estate’s value. A living will may also help you avoid paying too much in estate taxes. Talk to an estate lawyer for more information about whether a living trust is right for you.
Your living trust is considered funded when you actually transfer either part or all of your assets into the trust and change the title document of your property or assets to the name of the trust. Specific types of assets have procedures which must be followed. Talk to an estate attorney for more information if you have questions about how to do this properly.
If you choose not to fund your trust until after your death, your assets may not be protected from probate, unless they are automatically transferred at the time of death or through a specific beneficiary designation. What happens to the property that has not been properly re-titled into the name of the trust? It will have to be probated after your death.
Assets which can be transferred into the trust can include:
- Cash accounts, savings accounts, certificates of deposits and money market accournts.
- Brokerage accounts and non-retirement accounts.
- Nonqualified annuities
- Stocks and bonds held in certificate form
- Stocks held in a general and limited partnership or corporation. There may be specific procedures which need to be reviewed and followed.
- Life insurance
- Oil and gas and other mineral rights
- Real estate
- Copyrights, patents and trademarks
- Personal property — this can include personal belongings such as books, computers, clothing, furniture, artwork, etc.
- Secured and unsecured loans which are owed to you.
The cost to create a living trust will vary depending on whether you have decided to do it yourself or hire an estate lawyer. If you do it yourself you can pay as little as $100 for resource materials and the online software. Hiring an estate attorney could cost as much as $2,000.
Whether or not you will need legal assistance to create a living trust will depend on the complexity of your estate. Do some basic research. If you have a simple estate and limited assets, devoting a few hours to educate yourself on the process may save you hundreds of dollars.
If you have a complicated estate and want the assurance that the living trust is valid, or if you do not have the time or energy to research how to preserve your estate, an estate attorney can help. Estate lawyers can review your estate and outline a living trust which will meet your specific needs. They also understand how changes in your state’s laws may affect your estate planning.
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