One popular estate planning tool is a revocable living trust (referred to in this post as a “trust”). Why?
Because, unlike a Last Will and Testament (“Will”) (another essential estate planning tool you must have), which must be probated and only comes into effect after your death, a trust can help avoid probate. Plus, it allows you to control your assets while you are still living and even if you should become incapacitated.
Moreover, a trust controls your assets after your death. So, there’s plenty to like when in comes to trusts.
When you set up the trust with the help of experienced
estate and probate counsel, you will wear several hats. As the maker of the trust, you are considered the “Trustmaker” “Grantor” or “Settlor.”
That means you get to design the terms of the Trust, allowing each trust to be customized to fit every individual’s specific situation as well as the particular needs of his or her family.
During your lifetime, you are also the initial “trustee” (or co-trustee) of the trust. As trustee of the trust, you are in charge of carrying out the trust’s terms, and because the trust holds your assets for your benefit during your life and then distributes them according to your wishes after your death, during your lifetime, you are also the “lifetime beneficiary” of the trust. Thus, you have full access to the trust’s assets (principal and income) during your lifetime.
This may sound complicated, but it boils down to the fact that having a living trust allows you to avoid probate while still controlling all of your assets during your lifetime.
Setting up a trust is simple when you have experienced counsel to assist you, but there is more to setting up a viable trust than simply completing the paperwork. After the trust is created, there is one more thing you have to do.
Once the Trust has been created on paper, you must fund it. If you don’t, your assets may still pass through probate! Unfortunately, merely having a written trust doesn’t automatically avoid probate.
Unless your assets are in the name of a beneficiary, or are jointly owned, or are titled in a trust, they will pass through probate. To avoid that and gain the full protection and benefit of having a trust in the first place, you must “fund” your trust with your assets.
Funding a trust means transferring assets that are currently held in your name, whether individually or jointly with someone else, into the trust. During your lifetime, you will probably need to re-title certain assets into your trust (such as real estate and maybe even some financial accounts).
There may be other assets that you may want to name your trust as the beneficiary on. This includes things like financial accounts, life insurance and even retirement accounts.
Funding your trust is crucial, you don't want to skip this step.
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Sivia Law presents a six-step checklist to create your own “Life Planning Guide.” This guide helps you advise your loved ones so that they can honor your wishes for your health care desires as well as for the distribution of your estate.
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When it comes to planning your estate, having a checklist and important documents in hand is a key part of the process.
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