A living trust can be a powerful tool for passing the benefit of your estate to loved ones on whatever terms seem most appropriate to you. A living trust gives the grantor greater control over how assets are distributed, and can help to ensure that property stays in the family rather than being lost to creditors, former spouses, and others. But, many people are unsure where to start when it comes to creating a living trust.
A living trust is a complex legal document and is best prepared by an experienced estate planning attorney. However, this quick and easy living trust checklist will help you prepare to instruct your attorney:
- Understand the differences between a will and a living trust and decide which best suits your purposes.
- If you’re married, talk with your spouse about whether you want to create a shared trust. Otherwise, your ability to pass jointly-held property through the trust will be limited.
- Inventory your assets to ensure that you are considering everything and that you know how your property is titled and how it should be referenced in legal documents.
- Decide what assets you want to place in the trust. Generally, if you are using a living trust in place of a will, the trust will include property that would otherwise pass through an estate. Certain property may pass to a direct beneficiary or with rights of survivorship, but property that isn’t otherwise provided for could end up passing through intestate succession if it is not included in the trust.
- Decide who you want to succeed you as trustee, and talk with that person to make sure he or she is willing and able to take on that role. The successor trustee will be responsible for managing the trust for the good of your beneficiaries, so you will want to choose someone who is both trustworthy and well qualified.
- Decide who you want to benefit from the trust. This process is much like determining who will inherit through a will, but allows you a bit more flexibility, since you can limit the purpose or frequency of distributions rather than simply passing assets directly.
- Determine what type of instructions you want to provide for distribution of living trust funds. Assets placed in a trust may be transferred out of the trust to beneficiaries, may be expended on their behalf for a wide range of purposes, or may be designated for specific purposes such as educational expenses.
- Update your living trust regularly. One pitfall associated with a living trust is that the grantor may forget to title newly acquired property to the trust, creating a smaller pool of assets that will have to pass through probate when he or she passes away. If you choose to use a living trust in place of a will, make sure any property you want to pass through the trust is properly titled as it is acquired.
If a living trust seems like the right solution for your family, or if you’re unsure about the best approach to estate planning and need more information, talk to an experienced estate planning lawyer. While the various legal structures available for estate planning may seem complicated and there are important technical requirements associated with each, an attorney who works regularly with estate planning clients can explain the options in plain English and help you take the next step toward protecting your loved ones.