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The Lowdown on Wills and Trusts

A will is a basic legal document that allows you to choose how your property will be distributed after your death. A will also gives parents of minor children the chance to choose who will be guardian for their children. A will must be “probated” or proved in court to be valid. This means that property must be identified and appraised, debt and taxes must be settled, and attorney and court fees paid, all from the deceased person’s estate.
Probate can eat as much as 15 percent of an estate’s assets. A living trust, on the other hand, is a legal entity that owns and manages your property before and after your death, as well as defining h
ow assets, and the income earned by the trust, will be distributed after your death. If you should become incapacitated, the trust is in place to manage your financial affairs, usually by a successor trustee. A Cemeteryrevocable living trust is not subject to probate, and therefore, the trust will remain private.
 
Is a Trust Right for You? 
Because there are many different types of trusts, determining the answer can be a bit complex. Organizing your finances as taught by Money Mastery Principle 8 and consulting with a financial coach (this is not a financial adviser) will help you discover what is most beneficial for you and your family.
The idea of a trust has a history dating back to the early 1500’s where wealthy English landowners found it advantageous to convey the legal title of their land to third parties, while still maintaining ownership. Because they were no longer the “real” land owners, they could not be hounded by creditors and may have avoided problems with feudal lords. While such social class systems no longer exist and wealth is held in many forms other than land (i.e., stocks, bonds, bank accounts), the idea of placing property in third party hands for the benefit of another still survives today in the form of our modern-day trusts.
Are trusts just for the wealthy? Trusts are becoming a more popular estate planning tool that virtually anyone can take advantage of. There are no legal minimum amount of assets required to set up a trust. AssetsHowever, you will want to assess the number of assets you need to justify the cost of creating one and maintaining it. Even though a trust does not have to be probated at death, unlike a will it requires separate tax filing and other maintenance costs. 
What can a trust do for me? A trust is for anyone who wants to take care of his family before and after death. It allows you to control how your assets will be managed while you are alive and how they will be distributed after your death. For example, you may want your children to receive a certain sum of money on their 21st birthday. A trust will allow that money to be distributed at that time, even if you are still alive. You can name yourself as the trustee of the trust and personally control all of your assets.
What kind of trust should I set up? There are several different types of trusts, including the most commonly used — a revocable living trust — to life insurance trusts and privacy trusts, to irrevocable trusts. Meet with an experienced estate planning attorney to help determine which is right for you.
Who will be involved in the trust? Family trusts usually name the husband and wife as trustees. When one spouse dies, the other continues running the trust as co-trustee. When both die, a successor18284 trustee, who could be a son or daughter or other family member, will act as trustee. In the case of childless widows and widowers, a bank trustee can be named to manage the affairs of the trust. It is also wise to name a second successor trustee in case the first declines to serve. Upon your death and the death of your spouse, the successor trustee will either liquefy the estate and close out the trust or will continue to manage it for your family and heirs. The trust should be set up to compensate successor trustees for their service.
How are assets handled in the trust? One of the biggest mistakes people make with a trust is not putting all of their assets in the name of the trust. This is called “funding” the trust. Even when an asset is in the trust, it can still be sold, rented, or even given away. When you die, assets you wish to have distributed to beneficiaries pass directly to them, without requiring them to pay capital gains tax.
What documents are usually needed with a trust? You will still need a will, and a pour-over will (includes within the trust any property not specifically named in the trust at the time of your death). It is also wise to prepare a living will indicating your wishes in case of incapacitation, and a power of attorney, giving someone the legal right to manage your financial affairs upon your incapacitation.
For more information on trusts, contact me (801) 292-1099, ext. 1.

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