If you are considering using a Revocable Living Trust for your estate planning document, it is best to understand the process used to set up a Living Trust. An improperly funded Trust or one that is not signed correctly could face problems during the estate settlement process.
Choose a Trust
Spouses must have separate Wills, but if you are in a long-term marriage you and your spouse may create a shared Trust. You do, of course, still have the option of an individual Trust regardless of your marital status. For example, separate trusts would be appropriate for second marriages or if you have a pre-marital agreement.
List Property
After you have chosen a shared or Individual Trust, you create a list of your estate property. This will help you and your estate planning attorney determine what you have, what’s required to transfer assets into your trust name and if further planning for asset protection or estate tax reduction is required.
While the general rule is all assets should be carried in your trust name, there are exceptions. You do not have to place ownership of your IRAs or retirement accounts in the trust name. These assets, annuities and life insurance pass via beneficiary designation. Whether and how they should be connected to and coordinated with your trusts requires careful planning by your estate planning attorney.
Choose Heirs
Choosing the heirs for your property may be difficult. If it is, take your time and evaluate your reasons for including or disinheriting each person.
Manage Inheritances
If you have minor children, you can use your Living Trust to designate a Trustee to handle your children’s inheritances. This Trustee should be someone who is good with financial responsibilities. If the chosen person is not the same guardian you have chosen, that’s perfectly fine, and perhaps even more appropriate because caring for your children and managing the assets for them require completely different skill sets.
Create Your Trust
Once you have an outline of your Trust, you can work with your attorney to create your document. As the Trust maker, you will be the Trustee and Beneficiary while you are alive. You must choose a successor Trustee to take over your affairs if you experience a mental disability or when you die.
Fund Your Trust
As I mentioned earlier, it is important to fully fund your Trust with your assets as soon as it is created. Having your assets titled in the trust name, out of your individual name, is the only way to avoid probate. You should also reevaluate your Trust each year to ensure your beneficiaries and property are up-to-date.
Trust Location
And finally, don’t forget to find a safe place to keep your Trust. It should be a location where your Successor Trustee can easily find it when needed. Be careful about this. We have seen instances where original signature estate planning documents suddenly disappear when there are disgruntled heirs.