A Trust is an important part of your estate plan that can help with several purposes: avoiding probate, reducing taxes, and protecting beneficiaries.
However, they can also be more expensive to draft than a will. Here’s how you can minimize costs while still getting the benefits of a trust.
Choosing a Trustee
Choosing a trustee is a big decision. Often, family members are not the best choice for this position because they tend to make decisions on an emotional basis and may be unable to act impartially.
In addition, being a trustee is a time consuming job that requires the ability to work with a lot of assets and follow specific rules/provisions. Therefore, a professional trustee is typically the better option for most wealthy families. It is important to be clear with the trustee about what is expected in order to avoid any misunderstandings. Also, it is important to understand that there will be a delay between when the trust is funded and when the assets are distributed. This can be up to two years, depending on the type of trust and its provisions.
Putting Assets in a Trust
There are many different types of trusts that serve a variety of estate planning objectives. When setting up a trust, it is important to understand what property can be placed into it and how the trust will be managed over time. A qualified attorney can assist in determining which type of trust will meet your goals and help you transfer assets to it.
Depending on the type of trust, there may be specific rules and provisions that must be followed. For example, real property needs to be re-deeded in the name of the trust and bank accounts need to be changed to reflect the trust’s ownership.
A trustee is responsible for managing the trust’s assets, so it is crucial that you select a trustworthy person for this role. It is also important to plan for incapacity, which can be done by including a durable power of attorney with your trust.
Transferring Assets to a Trust
A trust is a legal entity that holds money and property you transfer to it. The trustee manages these assets and gives them out according to your instructions in a trust document. If properly structured, a trust can avoid probate and protect your estate from creditors and lawsuits.
You can put a variety of assets in a trust, including real estate, cash, bank accounts, stocks, bonds and investments. For each type of asset, the process for transferring ownership may differ slightly. For example, to transfer a piece of real estate into a trust, you would typically execute a deed granting the property from your name to the name of the trust. To change the beneficiary of an investment or bank account, you would usually fill out a new beneficiary form.
Changing the Terms of a Trust
When it comes to trusts, there are many options available and you may change the terms of your trust at any time. A common reason for this is a change in circumstances, like the death of a beneficiary.
Another possibility is the desire to change a trustee or beneficiary. For example, you may set up a trust for your children and name your brother as the successor trustee. However, years later you may decide that your brother is not the best choice and would prefer to have your sister serve as trustee.
The ability to change a trust depends on whether it is revocable or irrevocable. A revocable trust can be changed at any time by its creator (grantor). If the trust becomes irrevocable upon your death or incapacity, it must follow its terms.
Changing the Beneficiaries of a Trust
A Trust can help you control your assets and who will get them, even if your family is not good at managing money. It can also pass your estate outside of probate, saving time and money and protecting your family from creditors.
It is important to understand how a Trust works before you set one up, because there are specific rules and requirements that need to be followed. It is a good idea to meet with an estate planning attorney before you decide to make a trust. This professional can help you determine which type of trust best fits your objectives and provide guidance throughout the process. He or she can also help you choose a trustee and discuss the beneficiaries of your Trust.