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Trusts can be a major tool in anyone’s estate planning portfolio. It is an instrument that allows you to easily pass assets to named beneficiaries without the delay, cost, and public nature of probate.
Living trusts are highly favored since you can name yourself as the trustee and maintain total control over the trust assets. The only difference is that the trust is the owner of the assets. This means you can sell trust assets or buy property and add it to the trust. Also, your trust becomes effective immediately upon its creation. Because it is revocable, you can terminate it or alter any instructions you specified when you created it, including replacing any named beneficiaries. Be Careful – an irrevocable trust cannot be altered and any instructions and named beneficiaries may not be changed or modified.
For people who have married more than once, have special needs children, irresponsible heirs, large estates, or who fear creditor lawsuits, a trust can help protect these assets so that you can distribute them to whomever you wish without fear of having them considerably diminished by external conditions.
Fund the Trust
A living trust is great to have but not funding renders it ineffective. If you fail to change the title to any of your assets so that it becomes property of the trust, then it will have to pass through probate or be distributed by whatever terms dictate it such as in a retirement account, real estate, or stocks and may be vulnerable to creditor actions.
It is highly recommended that you make a list of all your assets, including real estate, stocks and bonds, bank accounts, collectables, and any other personal property. Transferring most of these items of property is not complicated but you will need at least a Certificate of Trust prepared by your elder law attorney to show that your trust does exist. Sit down with your attorney and review the various properties as she will advise you on how to transfer title. This includes changing the beneficiaries on certain accounts to that of the trust.
Should all your assets be included in your living trust? It depends on certain factors:
- If your estate is sizeable, you want to avoid estate taxes. A living trust can reduce the size of your estate so that estate taxes may not apply;
- If you are involved in a lawsuit, however, you cannot hide certain assets or render them immune to a judgment—let your elder law attorney advise you on this important aspect of trust law;
- If real estate, your attorney can advise you regarding financing if it must be done in your own name as well as transferring title to the trust and/or a Limited Liability Company [LLC];
You may also have considerable property that is untitled such as collectables, guns, or other expensive equipment. These can be included in your living trust as well.
What About Retirement Accounts?
Special consideration should be given to retirement accounts like an IRA or 401K on which your attorney should offer you advice. You can change the beneficiary to the trust, or name the trust as the contingent beneficiary in case the beneficiary predeceases you.
A beneficiary account can also protect the trust assets from creditors or ex-spouses but only after you pass away. Consult with your Attorney about how to retile the beneficiaries of your IRA or a 401K.
Consult Estate and Trusts Lawyer Patricia Bloom-McDonald
There are so many aspects and pitfalls to be aware of when doing an estate plan, including the drafting and funding of living trusts. You really do not want to attempt to do this on your own or use a form from the internet. Get the advice and counsel of an experienced estate planning lawyer such as Patricia Bloom-McDonald. For over 25 years, Ms. Bloom-McDonald has been counseling and representing clients in all aspects of estate planning. Contact her office today and see how she can structure an estate plan for your individual needs and goals.