When it comes to estate planning, mediocre efforts are never enough. While there are some who might think that the Last Will and Testament is more than sufficient to take care of their planning needs, the reality is that it takes much more than that to effectively protect your assets, safeguard your interests, and provide for your heirs. The living trust is something that should be considered as well. With a trust, you can take care of many of those important planning objectives that you simply cannot address with just a will. However, there are some specific things that you need to know when creating a trust, to ensure that you are making the right moves for your estate plan.
What Does a Living Trust Do?
A living trust provides a legal way for you to transfer your personal assets to another person or entity, who then holds and manages that property for the benefit of your chosen beneficiary. To fund the trust, you need to transfer ownership of those assets, which means that they are effectively removed from your estate. Obviously, that can have tremendous positive implications for tax purposes when the trust is irrevocable. But even revocable trusts can provide a host of benefits like probate avoidance.
Your living trust can also be used for a variety of unique estate planning needs. For example, you can create a trust to provide for the needs of a disabled heir whose benefits might be disrupted were you to simply leave a sum of money in a will bequest. A trust can be modified to include spendthrift provisions that prevent wasteful heirs from squandering an inheritance. Trusts can enable you to manage charitable giving, secure Medicaid eligibility, and take care of beloved family pets when you die.
What Components Make Up a Trust?
Before creating a trust, it is valuable to understand the specific components that make up this arrangement. When you create and fund a trust, you are the grantor. It is your job to help define the trust terms, provide funding for the trust, and name a trustee and beneficiaries. The trustee that you designate will be responsible for managing the assets in the trust and ensuring that they are distributed in accordance with the terms set forth in the trust. Your named beneficiaries will be the persons who receive the benefit of those assets.
With a revocable living trust, you can name yourself as the trustee, ensuring that you maintain control of your assets while you’re still alive. If you choose that option – and most people do – then you should also name a successor trustee to take over control when you pass away or become incapacitated in any way. As the trustee of your own trust, you can also arrange the terms so that you can continue to benefit from those assets during your lifetime, with secondary beneficiaries who receive the remaining assets after your death.
How Do You Create a Living Trust?
The creation of a living trust must be executed properly to ensure that the trust provides the benefits you need. To do that effectively, there are certain things that you must be sure to do:
- Choose the type of trust that you need to create. Will it be a basic living trust or something with specific provisions to care for a disabled child’s needs, protect wealth from a spendthrift heir, or help you plan for Medicaid or other end-of-life concerns?
- Decide who you want to name as your successor trustee, and select beneficiaries. Keep in mind that you can change these designations later. For example, if you have another child – or grandchild – at some point in the future, you can amend the trust to include that child as a beneficiary.
- Draw up the terms of the trust, naming yourself as the trustee and designating when and how assets are distributed to beneficiaries when you die.
- Make a decision about which assets you plan to use to fund your trust. Remember, without proper funding, your trust is useless.
- Get the trust documents signed and notarized by a notary public.
- Fund the trust. This is the part of the process that can cause the most problems for the average trust grantor, and many people fail to ever fully fund their trusts. This can be a complex process, so be prepared to ask for advice from your attorney.
Addressing the Complexity
While we’re on the subject of attorneys, it’s a good idea to retain one for this job. While there are many websites and advertisements suggesting that you can create a trust on your own – usually by using some downloaded form from the internet, the fact is that trust creation can be far too complex for the average layperson to manage on his or her own.
You can avoid potential problems and ensure that your trust is created the right way by relying on an experienced trusts attorney from the start. An estate planning and trusts attorney can provide the guidance you need to make sure that the trust you create is the one you need. In addition, he or she can offer useful advice and direction about trust language, beneficiary designations, and the proper mechanisms for fully funding your trust. Can you skip the attorney and try to do it all on your own? Absolutely. But don’t be surprised when you end up in a trusts attorney’s office months or years later trying to get your form trust fixed.
The Help You Need When You Need It
The estate planning and trusts experts at Fouts Law Group, LLC have the experience you need to make your trust creation process as simple and painless as possible. Creating a trust the right way requires a level of expertise that you won’t get from any cheap form document you find on the internet. Our team can provide you with that expertise and help you craft the perfect trust to achieve your broader estate planning goals. To learn more about how your trust creation can be simpler than you ever imagined it could be, contact us online or give us a call at (404) 596-7520 today.
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