People will sometimes hesitate to create a Trust based on a misguided fear that they will lose control of their money and other assets. However, the Revocable Living Trust, one of the most used estate planning tools, saves the estate from the expense and time-consuming process of probate while allowing you access to your funds during your lifetime. Additionally, a Trust can take advantage of a number of the different tax savings plans available.
Creation of a Revocable Trust
When you create a Trust, you are the trustee. This means you are the one who has the decision-making authority about what happens to your assets.
One advantage of a Trust is that you can include what you want to happen to you if you become either mentally or physically incapacitated. You name someone you trust who can make decisions on your behalf when you are unable to make them on your own. Your Trust document will tell the successor trustee who is managing your estate how to determine if you are incapacitated, and direct them on what to do in that eventuality. For example, the trust could direct them to arrange for you to stay in your home with a caretaker, sell your home, or wait and let your beneficiaries decide what to do with your home.
Some people include provisions to have certain friends or loved ones flown in to visit. Many provide very clear directions about how they want their assets to be managed for their care.
Basically, Trusts say, “This is what I want to happen to my assets in my lifetime.” This is followed by the direction that “This is what will happen after I die.” The creation of a Revocable Living Trust can be a more complicated than a simple Will but the trade off is that you get to include much more detailed instruction over how your affairs will be managed once you are no longer able to do so yourself.
Funding the Trust
Trusts have no real effect unless ownership of an asset is transferred to the Trust. For example, you will no longer be the owner of your home, but the owner will be the Trust with you as the trustee. You need to transfer ownership of each individual asset to the Trust that you want to be included in the Trust.
It is not necessary to transfer all of your assets into the trust. For example, life insurance policies and bank accounts can be set up to automatically go to your named beneficiary upon your death, rather than being placed in the trust.
Why You Need an Attorney to Create Your Trust
Depending on the size of your estate and applicable state and federal law, there can be substantial tax savings that only a professional can determine and draft for. There are many questions you will need to consider about what property to transfer to the Trust and what property to leave outside the Trust.
There also considerations about whether you have minor children to care for or a child with special needs that you want to provide for indefinitely.
You may need a Certificate of Trust on file with some institutions that is really a condensed version of your trust.
For answers to all your questions and preparation of a Trust document, contact us at Posey Legal, P.C.