Nobody likes to consider planning for their death, but ensuring that you have properly handled your affairs may be one of the most important decisions you’ll ever make. It can help to ease the emotional burden on your grieving loved ones and help to get all of the legal business involved with settling your estate over with as quickly and painlessly as possible.
One of the best ways to facilitate this is by setting up a trust. A trust allows your assets to be handled as you see fit, both during your life and after your death.
What Exactly is a Trust?
Simply put, a trust, or more formally a Revocable Living Trust, is a set of written instructions set up by an individual that dictate how his or her property and assets should be distributed upon their death. The main advantage to setting up a trust rather than creating a will is that a trust is the only way that you can avoid having your estate go through the lengthy legal process called probate. Because probate can be a drawn out and complicated process, many individuals choose to avoid this by creating a trust.
When you set up a Revocable Living Trust, you are considered the “settlor” or “trustor” and you transfer your assets into a trust that is held by “trustees”, who manage the assets in the trust for a designated “beneficiary”. While you are still alive, you are the “settlor”, “trustee” and “beneficiary”. During your lifetime, you continue to enjoy any and all income from the trust assets. Upon your death, the assets will pass to the named beneficiaries according to the expressed wishes of the settlor, thus avoiding the need for probate.
Using a Specialized Trust Attorney
Once you have decided to create a Revocable Living Trust, your first step will be consulting with a specialized trust attorney to make sure that everything is done properly. Using an attorney who specializes in estate planning and trusts can give you an extra level of security knowing that your estate is in the best possible hands.
While many attorneys offer estate planning as an ancillary service of their practice, attorneys who specialize in estate planning have a thorough understanding of all the state and federal laws governing the disbursement of estates, including the probate process. These specialized attorneys can help you to create a will, properly designate your beneficiaries, establish both a durable power of attorney and medical power of attorney, and find ways to reduce and avoid estate taxes and probate.
At the same time, with their specialized knowledge, these attorneys can also act as a resource to answer any of your questions and make any changes or updates to your will or trust as necessary so that your trust is formed to suit your individual needs.
Is a Trust Always Necessary?
While a trust can be a helpful tool for managing your estate, it isn’t always necessary. Certain conditions will dictate whether you really need to establish a trust and a specialized trust attorney can help you determine if a trust is necessary in your case. Generally speaking, any individual who owns real estate, has minor children or has more than $166,000 in total assets would benefit from having a trust.
While those are the basic requirements for having a trust, there are other factors to consider, starting with age. Since the main advantage of a trust is avoiding the probate process, the younger and healthier you are the less likely this is to be an important factor since you aren’t as likely to die any time soon. A trust is more important for individuals over 60 or those with a serious, life threatening illness as their heirs will likely be facing probate much sooner.
Another important factor that determines the necessity for a trust is the size of your estate. Generally speaking, the wealthier you are, the more important it is to enable your heirs to avoid probate, thus saving them time and money.
Also, the kind of assets you own can dictate whether you absolutely need to create a trust. If you have a small business, or you own multiple pieces of property in different states, having a trust established can greatly simplify the process of distributing your assets.
Finally, your marital status is also a factor to be considered when deciding if you need to establish a trust. If you are married and plan to leave the bulk of your estate to your spouse, then probate won’t be necessary and therefore there is no reason to establish a trust in order to avoid it.
The Advantages of a Revocable Living Trust
If you ultimately decide that a Revocable Living Trust is the right step for you, then you can move forward to establish it. Again, going this route can have some distinct advantages, including saving time and money for your trustee and heirs.
The cost and duration of the probate process can vary from state to state, but in most cases it can be exorbitant and the entire process can last from twelve months to a period of several years. In comparison, a trust may be expensive to establish but once it is created, the expenses stop there. With a trust in place your estate can be distributed in a matter of months and sometimes even faster.
Another important benefit to a Revocable Living Trust is that the entire process is completely private, unlike probate proceedings which are a matter of public record. Only you and your beneficiaries will even know the contents of your trust. Also, trusts are notoriously difficult to challenge, which again can help to avoid a lengthy and costly legal proceeding to hear any challenge and determine whether it is legitimate.
If you happen to have property in more than one state that can complicate the probate process even further as the differences in state law will require separate probate judgments for each state. Once the estate has been probated in each state, then it will have to be open to challenges. Again, this can drag out the whole process and may require your heirs to travel from one state to another while the entire process is ongoing, adding excess stress to an already difficult time.
A Revocable Living Trust can also have benefits while you are still alive. By establishing a trust you can ensure that someone will be designated to handle your financial and legal affairs if you should be rendered incapacitated. This can not only help to ensure that you get the care and treatment you require but also that the rest of your estate is handled properly.
Revocable Living Trusts and Estate Planning
Establishing a Revocable Living Trust is just one facet of the entire estate planning process. Proper estate planning is vital in order to simplify matters for your heirs and allow them to avoid or at least simplify going through probate. An estate planning package can include everything from creating a trust, to writing a will, to creating what is known as a “pour-over” will, or a will established in conjunction with a trust that allows any assets not included in the trust to be directed into the trust at the time of death.
An estate planning package can also include other services such as creating a Durable Power of Attorney and an Advance Health Care Directive, both of which can give you piece of mind while you’re still alive. A Durable Power of Attorney designates an authorized agent to make all personal financial decisions for you and an Advance Health Care Directive establishes which actions should be taken to prolong your life should you become incapacitated. Your attorney will also help to write up a Certification of Trust and a Schedule of Assets, two documents that are necessary to lay out all of your assets and retitle them into your trust.
It may not be pleasant to consider planning for your death, but every step you take now will make things easier for your heirs in the long run. If you’re concerned about avoiding probate and reducing the stress on your heirs, then you should consult a specialized trust attorney and discuss your options for estate planning, including the creation of a Revocable Living Trust. It’s best for everyone involved, so do your estate planning and consider establishing a Revocable Living Trust today.