A Living Trust is a powerful estate planning tool that can not only help you manage your property later in life, but distribute or manage it according to your wishes upon your death. A quick review on living trusts:
A Living Trust is an estate planning tool that is often used as a will substitute. When you create a trust, you transfer assets such as real estate, stocks and bonds, and personal property to the trust. These assets are then managed for your benefit during your lifetime, and either continue to be held and managed or transferred to your beneficiaries by a Successor Trustee when you die.
But you must make decisions prior to creating a Living Trust, and ask yourself these four questions:
1. Who will be the Beneficiaries of the trust?
For many families, the children and/or spouse are chosen as Beneficiaries of a living trust, much as they would be the Beneficiaries within a will. But the Beneficiaries are your choice and may be anyone from a family member, spouse, child, friend or even an institution. There is one exception however, and it’s one to discuss with your estate planning attorney: spouses may be entitled to a certain portion of an estate, which varies from state to state.
2. Who will be the Trustees of the Living Trust?
Choosing a Trustee for a Living Trust actually involves two choices; one to manage the trust during your lifetime, which you may name yourself as the initial Trustee, and another choice, a Successor Trustee to take over the trust duties upon your passing.
3. How will I fund the Living Trust?
Transferring property to a Living Trust is also known as funding the Trust, and you are able to place any amount of property within the Trust. Many creating a Living Trust choose to transfer their major assets, such as their home, stocks and other valuable items, to the Trust. But again, this is best discussed with your Trust Attorney.
4. How will my debts and liabilities be paid when I pass away?
In order to preserve the assets of the Living Trust, it’s best to have another mechanism with liquidity in place to pay liabilities such as funeral expenses, probate fees or estate taxes.
A Living Trust Attorney can help you make these decisions and ensure that the Trust fits your estate planning goals.