We live in unprecedented times when pandemic and climate change take lives from out of nowhere. A well-constructed estate plan can help you provide for your family by giving them your hard-earned money and property. While people commonly go for only a last will and testament, a trust can help decrease your family’s headaches in the event of your passing.
It’s a common misconception that only the extremely wealthy should get a trust. Anyone can take advantage of this handy estate planning tool. It allows you to arrange precisely how you want your estate to be handled, including when and how your beneficiaries will receive their inheritance.
In this article, we’ll give you a brief overview of how trusts work and how you can go about setting up a trust. If you want to get started on your estate plan to ensure the future of your spouse, children, even grandchildren, contact our experienced Orem estate planning attorneys now!
An Overview of Trusts
A trust is a fiduciary agreement where a trustor (also known as settlor or grantor) appoints a trustee to handle their assets and property for the benefit of the beneficiaries.
Benefits of a Trust
The main reason for getting a trust is that it avoids probate. During probate, the court supervises the process of verifying a deceased person’s last will and testament. Trusts, however, avoid the probate process entirely. This provides several benefits:
- Probate is a matter of public record. Avoiding probate keeps your family’s affairs private.
- Probate lets other people contest your will. If you avoid probate, you give your hard-earned assets to the people you care about most.
- Probate takes a lot of time and money. With a trust, you can give your assets almost immediately after your death.
Aside from avoiding probate, trusts can also help you:
- Reduce taxes, such as estate tax, capital gains tax, or income tax;
- Keep yourself eligible for government-provided benefits;
- Donate to charitable organizations while earning income; and
- Protect your assets from creditors.
Disadvantages of a Trust
The only main disadvantage of a trust is its cost. Depending on the complexity of the trust and the type of trust, you may have to pay more so the assets are handled per your specific wishes.
However, it may be more costly in the long run not to have a trust. The probate process can take months or even years. During this period, your beneficiaries cannot benefit from your assets. They’ll also have to pay attorney fees and other court-related expenses for this duration. A trust lets you avoid all that and can be cheaper for your family.
Revocable Trust vs Irrevocable Trust
There are different types of trusts. The common ones are revocable living trusts and irrevocable trusts. Revocable trusts let you modify the terms of the trust, like adding or removing assets. Irrevocable trusts are essentially set in stone. You cannot modify or revoke anything that’s in the irrevocable trust. Take note that a revocable trust becomes irrevocable once you pass away.
It can be easy to set up a trust. There are services that can help you craft legal documents for creating your trust. However, we recommend that you get the services of a professional estate planning attorney. If you overlook any small detail, it may be detrimental to your family once you pass away.
How to Set Up a Trust
There are just five steps to setting up a trust:
- Create a trust document
- Sign the agreement
- Set up the bank account
- Place assets into the trust
- Name the trust as beneficiary
1. Trust Documents and Paperwork
The document explains how you want your trust to work.
In brief, the trust document establishes:
- Who the grantor is.
- What assets are held in trust.
- Who the beneficiaries are. Living beneficiaries receive their share of the estate while you are still alive. After death, the remaining assets will be given to the remainder beneficiaries.
- Who the trustee is.
- Who the successor trustee is. This person is the one who takes over when the trustee passes away or becomes incapacitated.
2. Notarize the Agreement
You’ll want to sign your trust in front of a notary. This confirms the validity of the trust and prevents fraud.
3. Set up a trust bank account
The easiest way to fund your trust with money is through a bank account. This is doubly important for those who want to provide money to their heirs via a trust fund. You may either:
- Register an existing account into the trust’s name; or
- Create a new account for the trust.
4. Transfer assets into the trust
A trust is its legal entity. For the trust to hold assets, you have to transfer the ownership of your property to the said trust. How this works depends on how you own the asset and the type of asset itself.
If you have many different types of assets, then it’s best to ask our Orem estate planning attorneys how you can go about transferring ownership to your trust.
5. Designate the trust as beneficiary
Some kinds of assets require you to name the trust as a beneficiary. These include retirement accounts or life insurance policies.
These assets are payable upon your death. This means that your beneficiary can receive these without the probate process. For these kinds of assets, you’ll need to name the trust as your beneficiary so the assets are transferred into the trust upon the death of the grantor.
When it comes to your family’s financial future, you have to ensure that everything is in order in the event of your demise. A trust lets you easily transfer your assets and your property to your beneficiaries while avoiding probate. Our skilled estate planning attorneys at Waldron Law Group can help you develop your estate plan to ensure that your last wishes are carried out.
There are many elements to an estate plan. Aside from trusts, you can have wills to designate who receives your assets. Our Orem estate planning attorneys can help you include other important parts of your estate plan, such as durable power of attorney or an advance directive.
Don’t wait a day longer. Contact our Orem estate planning law firm now and plan your family’s future today!