Why Create a Trust?
According to real estate columnist, Robert Bruss, the best way to hold title to real estate is in a living trust, as he states, “a revocable living trust is an easy way to hold title and avoid probate costs and delays for your heirs after you’re gone.” If you want your heirs to receive your assets quickly and free of the high costs of probate, then you create a living trust. A typical living trust package includes:
The Articles of the Trust (which avoid the probate)
A “Pour Over Will” (The “Will” with your trust that catches any residual assets, (i.e. furniture, car, etc.) and “pours” them into the trust)
A “Living Will”
Two Powers of Attorney to plan in the event of subsequent incapacity – the “Health Care Surrogate Power of Attorney” for health care decisions, and the “Durable Power of Attorney” for financial decisions.
Living Trust Advantages
- Living trusts have five main advantages:
- They avoid probate
- They allow for privacy (wills are recorded, trusts are not, thus trusts never become public record)
- They allow for flexible management
- They save families money (on probate, legal, and court costs)
- They allow for easier and quicker transfer of assets upon one’s death.
Revocable Living Trust
Upon setting up your Revocable Living Trust, while you’re alive, you are still the owner, called the “Trustee.” That means you supervise everything just as before. You can buy, sell, refinance or do whatever you want with your real estate and other assets. But when you die, the trust becomes irrevocable. The trust assets go to whomever you specified in the trust (after paying your bills). Until you die, however, you can change or revoke the living trust. The major advantage of a living trust after you pass on is that there are no probate costs or delays.
Another major advantage of a living trust occurs if you should become unable to manage your affairs, perhaps due to a stroke or Alzheimer’s disease. Then your alternate or “Successor Trustee” takes over management of your trust assets; this person might be your spouse or an adult child. If you did not have a living trust, the court would appoint a guardian or conservator, at considerable expense, to manage your assets.
Although your living trust becomes an active document upon signing, you may need to transfer certain assets into the name of the trust for those assets to avoid probate; this is call “funding” your living trust. In other words, “funding” your trust simply means to re-title your assets from your “individual” name(s) to your “living trust” name, as assets left titled in one’s “individual” name may be subject to probate if left titled in the decedent’s individual name only. For instance, for your home, this may be accomplished by using a quit claim deed for transfering title to your trust name, (Freedom Rings can prepare your quit claim deed for just $69.00). After recording your new deed with the clerk’s office in the county where your property lies, then you have successfully transferred your property into your trust. In addition, you may need to contact your bank, and any other institutions where you hold assets, and direct them to rename your accounts as belonging to your trust. Such institutions may have you fill out a simple form in order to fund your account into your trust.
Also, your trust document will designate a “Successor Trustee” who will administer your trust after your death per your wishes as stated in your trust. You may also name an “Alternate Successor Trustee,” in case the primary Successor Trustee is unable or unwilling to act. You will also name your beneficiaries, as well as alternate beneficiaries.