As you consider your estate planning options, you should not overlook the revocable living trust. This type of estate planning tool is simply a legal document that sets out your instructions for distributing your estate after your death. Because it is revocable, it can be amended or revoked at any time before your death. Without a trust, or some other estate planning instruments, a large portion of your assets may be lost to probate court fees, unintended heirs and estate taxes.
One of the primary advantages of creating a trust is the ability to avoid the probate process. Probate is the legal process of administering your estate, including paying your creditors and distributing the remaining assets to your beneficiaries or heirs. With a revocable trust, the terms of the trust agreement determine how your assets should be handled. Distributing your estate in accordance with the terms of your trust does not require the cost and delay of the probate process.
Another major benefit of a revocable trust can be realized even during your lifetime. A trust can provide continuity of management of your affairs should become disabled or incapacitated in some way. You can designate a trustee in your trust agreement to take over management of your affairs if you become physically or mentally incapable of doing so. While you are alive, you maintain full control and use of your assets. Your successor trustee takes over after your death, to distribute your assets to your named beneficiaries. So you remain in control.
What does it mean to fund a trust and why is it so important?
After setting up a revocable living trust, the next step is funding the trust. You cannot reap the benefits of a trust until you actually fund it properly. “Funding” simply means actually transferring your property and assets to the trust. There are three basic methods: changing the title or ownership of the property to the trust, assigning the ownership rights to the trust, or changing the name of the beneficiary to the name of the trust. The method you use will depend on the type of property you are transferring.
What does a pour over will accomplish?
In the event you own any assets in your name at the time of your death, which were not included in your living trust, a pour over will can provide that those assets be added to the assets already transferred to the trust. This means that all of your assets will be distributed according to the terms of your trust agreement. This way, at least, those additional assets will not be subject to the laws of intestate succession, which is a predetermined method of distributing property to heirs.
There is a catch, though. Assets transferred to the trust, through a pour over will, are still subject to probate, before they are added to the trust. The purpose of a trust is to avoid the time and expense of probate. Even though the assets governed by the pour over will are ultimately added to the trust, probate cannot be avoided, at least with respect to those assets. That is why it is important to periodically your assets and the terms of your trust to ensure all of your property is included.
Don’t Forget Property You Own in Another State
If you own real property in another state, that property can likewise be transferred to your living trust. In fact, out-of-state real property should always be transferred to your living trust. Otherwise, ancillary probate proceedings will be required in each state where you own real property. On the other hand, if the property is owned by your living trust, there is no need for that property to go through probate anywhere.
Download Our Free Estate Planning Worksheet
We go the extra mile to provide many different tools that help people gain a better understanding of the process of estate planning. One of them is the worksheet that we have devised, and it is available free of charge on this website. If you download your copy of this valuable worksheet, you will be much more prepared from an estate planning perspective. To obtain your copy, click this link and follow the simple instructions.
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