In a previous lesson we learned that there are only two documents that are recognized by the courts when a person dies. Either you have a will which you had written or one given to you by the state in which you live, or you have set up a Trust.
There are a variety of flavors of Trusts. Which is best for your situation will be determined by your estate planning attorney. The discussion here is about a Revocable Living Trust, the type I have for my family. Revocable means it can be changed during your lifetime, so you maintain complete control over your estate and your situation.
Nothing has changed since I set up our trust. I still pay my bills and do my taxes the exact same way I always have. The only difference is that now I do these tasks as manager or ‘trustee’ of my trust. I do this because my trust is actually the owner of all of my possesions. My home and car are owned by my trust, as are my bank accounts and brokerage accounts. By allowing my trust to own everything, at my death my family will avoid the probate process, simply because I have died and I don’t own anything.
Seems almost too simple, but for the 200 plus years that trusts have been used in this country, the underlying process is just that uncomplicated. A qualified estate planning attorney drafts the trust document. All assets are moved (“Funded”) into the ownership of the trust. The trustee of the trust (that’s you) takes care of business just like you always have. At death, the county is informed of your death and the fact that you own nothing, all is owned by your trust. Your family then settles your trust, led by the person you have put in charge, your ‘successor trustee’, whose job it is to follow the instructions you have put into your trust.
Avoiding probate is the major benefit, saving families the 3 to 8% in costs and the 18 months usually needed to settle a Will. The added benefits of a trust make it a perfect vehicle for blended families, familes with special needs children, non-traditional couples and those that want to control the payout of the inheritance over a period of time. Since the assets in a trust do not need to be distributed immediately it can serve to hold onto property and other assets until the hiers are in a good position to receive them.
A trust is also a very private affair. Since it is settled by the family, there is no need for courts, judges or the state to get involved. It avoids the public records provision required for court proceedings.
The intention here is not to over simplify what is required around having a trust as your final document, but to not over complicate the process either.
Done properly an individual or couple is walked through the steps in a systematic and thoughtful way. It is important that each step be taken to fully and properly ‘fund’ the trust. Any assets held by the trust are protected from probate. Assets left out of the trust can be subject to probate, defeating the whole purpose of setting up the trust in the first place.
The last ten years have shown an increase in the number of people choosing a Trust as their estate planning document. Financial and legal experts have been heard lauding the benefits of a trust over a will. It takes a qualified estate planning attorney who has taken the course work and devoted their practice to this special area of the law to properly assist in the planning and drafting of a trust that is right for you and your loved ones. Lifetime services then assure that your intentions are cared out as you planned.
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