What Is Involved In Setting Up A Living Trust
Setting up a living trust may be the best way to ensure your assets are passed onto the right people if you pass away. So how do you start the process?
The first piece of advice I would give you is to consult an estate planning attorney. This is an area where self-help and online resources like LegalZoom can get you into trouble. If the trust and follow-up steps are not done correctly, you can have totally wasted the time and money you may have invested in the program.
If you have decided after talking with a qualified attorney that a living trust is a good estate planning tool for you, there are several steps that will aid you and your attorney in drawing up the trust.
1. Gather Together Information About The Assets To Be Placed In The Trust
Good descriptions of all the assets you want to place in the trust are a must. You'll need them to implement the transfers to the trust and to require any third parties who hold the assets to deal with the trustee after the transfers.
You should provide your attorney with account numbers for investments, bank accounts, bonds, retirement accounts, and legal descriptions for real estate and mineral interests.
If you own valuable personal property such as jewelry, artwork, coin collections, and things of that nature, you should give your attorney a detailed description of that property as well, so the trustee will be able to identify and transfer it upon your death.
2. Determine Who You Want To Have As Primary And Successor Trustees
A key function of a living trust is to provide for someone else to take over management of the assets you have placed in trust if 1) you become incompetent or 2) you wish the trust to continue after your death.
You should give serious thought to who this trustee should be and whether it is wise to put them in the position of having to deal with the demands of the beneficiaries. Sometimes, that is a very unpleasant job and it might be best to name a bank, another third party, or a non-family member.
Most people will name themselves as the initial or primary trustee so they maintain control of their assets as long as possible. If you become incapacitated or incompetent, you will need to have designated who you want as successor trustees to take over handling the trust. I strongly recommend naming at least one if not several alternate trustees.
3. Determine How You Want The Trust To Operate During Your Lifetime
Most people will want to retain control over the assets, acting as the trustee, during their lifetime. That way, the choice is up to you. You will need to decide if you want all of the income from the trust distributed to you during your lifetime or not. You also will need to decide whether you want to be able to use the principal of the assets for your support, if necessary.
You should also decide who you will take over management of the trust assets if you become incompetent, or in other words, who will serve as a successor trustee.
4. Determine How You Want The Trust To Operate After Your Death
Some people want the assets of the trust distributed as soon as possible after their death to the intended beneficiaries. Others want to control what happens to the distribution of the principal and interest of the assets as long after they are in the grave as possible. They envision a dynasty trust to preserve assets like a generations-old family farm, ranch, or mineral interests that will be passed down for hundreds of years.
The interests of minor beneficiaries should also continue to be held in trust until they're of an age when you believe they will be smart enough to manage on their own. You can determine whether that is 18, 21, or even 50 under the terms of the trust.
5. Finalize The Trust Agreement And Transfer Documents
Once these decisions have been made, the attorney can finalize the trust agreement and have you sign it. The final step is to prepare transfer documents, such as assignments of investments and deeds to real property interests, to place the assets in the trust.
The transfer documents are a key element of this process. If an asset is not placed in the trust, probate will be necessary to pass that asset on. Too many people have learned this sad lesson. This means that you must keep up with assets you acquire over your lifetime to be sure they are placed in the trust if that is how you want them to be dealt with after your death.
Next Steps: Find Out If A Living Trust Is Right For You
To get a better idea of the information we will need to help you discuss whether a trust is a good legal move for you, download my free trust questionnaire.
If you are considering setting up a trust and would like to discuss your needs and the likely cost, please contact Adair M. Buckner to schedule a free initial consultation.*
*(The free consultation does not cover actual review of documents or giving legal advice on a specific situation.)
** Please remember that the cost estimates given are only general, ballpark numbers for the Amarillo area and the costs can vary widely depending on many variables in your individual situation.
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