The main purpose of a living trust is to avoid probate. Another purpose is to manage assets and property in a way that helps avoid taxes and complications regarding transfer of property.
The above is accomplished by transferring all your assets and any real estate into a living trust after having created it.
You can create a living trust on your own by downloading forms online, but before you rush off to do just that, consider the importance of the above. Are you comfortable entrusting the importance of all the above to a template—one often created long ago and never reviewed and updated by an attorney to satisfy current laws? Or are you starting to think you might need a living trust attorney after all?
Retaining an experienced living trust attorney, one who will review your trust with you to ensure that the language in it covers everything specifically important to you, doesn’t need to cost a lot of money, contrary to what you often hear.
On first look, a living trust might appear to be simple. But, there is a lot of legal jargon in there that could come back to bite you, or your heirs, if it’s not done in the way required to avoid probate and taxes. If this is of concern to you, you might need a living trust attorney. Laws change, living trusts need to change along with them. Besides, what’s right for Joe next door is not necessarily right for you.
However you obtain your living trust, by creating it yourself or deciding that you need a living trust attorney, be sure all of these items are covered:
- The name of your trust (this can simply be your name, such as The John Smith Trust)
- Name an Initial Trustee. This is usually you. The initial trustee is the one who manages and deals with anything that has to do with the trust. If you are married, this position can be shared with your spouse.
- You also name a Successor Trustee. This is the person who takes over from the Initial Trustee, when he or she either passes away or becomes incapacitated to a point that keeps him or her from being able to manage the trust. If you are married, this is usually your spouse (this is usually a first choice though it’s not mandatory). If you are single, you typically name an adult child, a relative to whom you are close, or a close friend.
- Next, you state specific distributions, if any. An example of this would be if you want to give your cousin Louise the silver silverware set you inherited from your mother, but nothing else. Or you want to give your son that guitar you’ve had your whole life because he’s a musician and your other children don’t care about music all that much. This is the place in the living trust where you would make that clear.
- You name the beneficiaries. These could be your children to whom you give equal percentages. For instance, your son and daughter each get 50% of your estate, after the guitar has gone to your son.
Anyone to whom you want to give property of any kind is named in a living trust, whether that be under
specific distributions or under the distribution of the balance of the trust.
- A good living trust package includes a Pour-over Will. This is a document that serves to bequeath to your living trust all property you have not had time to transfer to it before your demise.
- Also, if you have minor children, you can name a guardian for them in the Pour-over Will.
- You can choose to make the children’s guardian a successor trustee for any of the property that goes to them. This is not required by law. You can just as well name a different individual to handle their financial affairs until they come of age, or until they reach any age you name as the time for them to take over the management of the assets you have willed to them.
- Note that a pour-over will does go through probate, but the process will be greatly shortened and simplified because it goes to the living trust.
A very important thing to consider with a living trust is that it has no legal standing at all until you transfer your assets into it. If you own a house and you want that house to be handed to your children without it going through probate, it must be quit-claimed to the trust. Anything else of value must be formally given to the living trust, such as art collections, cars, household items of small and large importance, stamp collections, etc.
Furthermore, your bank accounts need to be changed into the name of the trust to keep them out of probate too. A good living trust package has a trust summary included; this is a one page document that states the name of the trust, the beneficiaries, the initial trustee and the successor trustee(s).
All of this is a fairly straight-forward process—if you create (revocable) living trusts all the time. All in all, you could create your own, but consider finding an experienced living trust attorney. It will go a long way to avoiding your heirs the serious legal issues that can arise from an improperly drafted trust. If it’s not done properly, they will need a living trust attorney and it will cost them a lot more to fix a “broken” trust than for you to have one done correctly to begin with.
If you decide to do this on your own, be sure to do a thorough search and teach yourself about trust fundamentals. Also, beware. There is a ton of misinformation and outdated information out there.
And before you start, don’t forget to consider the amount of time you will spend essentially teaching yourself living trust law against the cost of a reasonably-priced living trust attorney.