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"If you have
not created a will or living trust, or need to update your will
or living trust but haven't...then you need to read the Estate
Planning Organizer."
A living trust, also known as a Revocable Living Trust or a Family
Trust is a legal document that holds title or ownership to your
real property and assets. When you create a Revocable Living Trust
you transfer ownership of your assets to the trust. Transferring
assets is typically called "funding." When you transfer title you
DO NOT relinquish any control. You can still buy, sell, borrow
or transfer.
To many the living trust looks a lot like a will. It includes
the details and instructions for how you want your estate to be
handled at your death. However, unlike a will a properly funded
trust:
- Does not go through probate.
- Prevents the courts from controlling your assets at incapacity.
- Gives you control over the assets you leave to your minor children
or grandchildren.
No! The living trust is a written legal document that allows you,
as the trustee(s), unlimited access to and full control of your
assets during your lifetime. It also enables you to pass property
after your death to family, friends and/or loved ones. It allows
you to appoint someone (a successor trustee) to make certain your
property goes to the ones you choose after your death.
Many individuals are under the impression that their will alone
is sufficient to avoid probate. Unfortunately, a will is simply
an expression of your wishes and must go through some kind of court
process before the assets can be distributed to the heirs.
The reason for probate is needed because the owner of the property
or asset is deceased. Once the owner of the asset has died, probate
court is the legal process needed to take their name off the title
of an asset and put it in the new owner's name. Learn
more about probate here.
Putting your children's name on your property does not avoid probate,
rather it only puts it off for a few more years. To learn more about
joint tenancy and why it is a poor option click
here.
For a trust to be effective it has to own title to the property
or asset. Remember, when you transfer title of your assets into
the trust it is called "Funding your Trust." Funding is the process
of transferring the name on accounts or property to the name of
the trust. For example, accounts in the name of Bill and Mary Stevens,
would now be held as "Bill and Mary Stevens, Trustees of the Stevens
Family Trust dated date signed and year"
When the assets are in the name of the trust there is no need
for probate since the estate is now controlled by the trustee of
the trust. You or you and your spouse can be the primary trustees
receiving full control to buy, sell, borrow or transfer in the case
of a spouse's death. After both spouses pass, the trust identifies
the person who will act as successor trustee. The trust gives that
person the right to manage all assets on behalf of your wishes made
known in the trust document. Remember, you and your spouse
will decide who will manage all affairs.
To better understand the trust, we thought it would be important
to explain the different roles of the people who would be involved.
Grantor
This is the person who sets up the trust. This would be you. The
grantor has many names such as the creator, settlor or trustor.
As the grantor, you have full control to manage or change the trust
at any time.
Trustee
The trustee is the person who will manage the assets in the trust.
Again, this will most likely be you while you are alive. When a
trust is created, the trustees are usually the same individuals
as the grantor. For married couples, usually the husband and the
wife both act as co-trustees. You do not have to be your own trustee
if you do not want to or do not feel you are able to. You can name
a child or friend or even an institution to manage your affairs
for you while you are alive.
Successor Trustee
This is the person who will manage your assets for you when you
die or if you should become incapacitated. This person or persons
will have the right to manage your affairs without the need for
any probate court. The successor trustee will immediately have the
same powers that you as grantor/trustee had to buy, sell, borrow,
or transfer the assets inside the trust. More importantly, the successor
trustee has the right to distribute the trust's assets according
to your instructions in the trust. This immediate control can allow
your estate to be transferred to your children or loved ones right
away avoiding the time delay of probate which can usually consume
anywhere from 6 months to 2 years.
Fortunately for you and for the protection of your heirs, the
successor trustee does not have the legal right to change your trust.
The trust becomes irrevocable or unchangeable after the death of
the grantor(s). However, the successor trustee does have the right
to manage the assets in the estate, but must do so for the benefit
of the beneficiaries.
Beneficiaries
The people who will receive the benefit of the trust's assets are
called the beneficiaries. Typically the estate will go to the surviving
spouse. If there is no surviving spouse, assets will pass to the
people you named in your trust. You are not limited to who you want
to receive your estate. You can name your children, relatives, friends,
or a charitable organization to be your beneficiary.
After you pass away, your successor trustee or co-trustee will have
the same responsibilities an executor would have if you would have
prepared a will. However, since your trustee does not have to report
to a probate court everything can be done more efficiently and privately.
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|  If
an illness or accident leaves you incapacitated, your successor
trustee can handle your financial affairs without the need
for a court appointed guardian or conservator.
If
the beneficiaries of your trust are minor children or others
who might not use an inheritance as you intend, the trust
can continue to hold the assets until they reach a more mature
age.
If
you own real property in more than one state you avoid the
expense, time and hassle of multiple probate proceedings.
By
using a trust, a husband and wife can maximize both their
federal estate tax exemptions.
Trusts
are generally more difficult to contest than a traditional
will. To invalidate a will you must either prove it was signed
under duress or that the maker was incompetent on the day
it was signed. To invalidate a living trust you would have
to prove it was invalid not only on the day it was signed
but each and every day it was in existence thereafter.
It
is almost impossible to contest a Living Trust. When a will
is contested the assets are frozen and they cannot be distributed
until the claim is resolved. Assets placed in a living trust
are not frozen pending the outcome of a legal challenge. Anyone
wishing to contest the trust must file suit against each of
the beneficiaries; in the meantime the assets in the trust
can be distributed. |
NEXT:
What does Probate mean for my family and me? |
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