We all know we’re going to die someday, but that doesn’t mean we’ve planned ahead for the inevitable. Only four out of 10 Americans have a living trust or will.
Many people find it complicated and don’t know where to begin. While you can hire a trust attorney to handle it for you, it’s not always all that difficult to do it yourself.
If you’ve been thinking of setting up a revocable living trust, keep reading. We’re sharing with you the steps to take to set up a living trust.
What Is a Living Trust
There are several types of trusts you can set up to protect yourself and your assets. One of the most common types of trust is known as a living trust or revocable living trust.
A revocable living trust is a legal document that has instructions for what you want to happen to your assets after you pass. However, unlike a will, a living trust helps your beneficiaries avoid probate after you pass.
Once it’s set up, you place all your assets into the trust. That includes investments, bank accounts, and even real estate.
After you take this step, you no longer own the assets, the trust does. However, since the assets belong to the trust, your beneficiaries can avoid going through probate.
You Still Control Your Assets
You can continue controlling your assets while you’re alive. You can also change and amend your revocable trust at any time. Any income earned through the trust’s assets is yours and is still taxable.
You can set up a “pour-over-will” where assets not included in the trust will automatically transfer to the trust upon death. While a revocable living trust isn’t for everyone, if you decide on setting one up, it’s important to get everything right.
Many people prefer to hire a trust attorney. However, it’s also possible for you to do it on your own for a fraction of what your living trust lawyer will charge you.
How You Can Set up Revocable Trusts Yourself
While attorney fees differ, it’s not uncommon to spend around $1,200 to $2,000 on living trust attorney fees. If you do it yourself via a book or software, you’ll spend around $40.
Creating revocable trusts is easier than creating a last will and testament. Here’s what you need to know to get started.
In most instances, both the creator of the trust and the trustee (the person managing the trust) is you. You’ll need to appoint someone as your trustee to take over managing the trust and distributing all property after you pass or are incapacitated.
Most people list their spouse, a child or a friend. Next, you’ll need to know who you want to leave the property of the trust to. These are your beneficiaries.
If you plan to leave property to a beneficiary who is a minor, it’s a good idea to delegate a trustee to manage it for them until they’re competent or old enough to manage it for themselves.
What Happens After the Trust Is Drafted
Once everything is finalized, you’ll need to sign it in front of a notary so they can act as a witness to your signature. Laws differ from state to state so do your research to make sure your trust documents are legally enforceable. For instance, some states require additional witnesses to sign the document.
Also, some states require real estate deed transfer documents to be prepared by an attorney. If you own real estate, check with your local land records office to see if this is also a requirement.
After everything is drafted and signed, your next step is to fund the trust by transferring your assets into the trust. You will need to open up a bank account in the name of the revocable living trust.
Make sure you bring along all the appropriate paperwork to your bank when you open up the account.
The Pros of a Living Trust
One huge plus for planning a living trust is your beneficiaries avoid going through the probate process. Depending on the state you live in, probate can end up being a long and expensive process.
But there are other plusses such as you get to keep your assets private, even after you pass. The probate process makes all documents part of the public record which anyone can access.
And a living trust helps eliminate beneficiaries from challenging the estate. A potential heir that you disinherit through a will may still inherit by challenging the will. It is much harder to challenge a trust successfully.
Why a Living Trust Isn’t for Everyone
There are no tax breaks associated with a living trust. And if you do it on your own and don’t plan properly, it could lead to a whole host of new problems to sort out.
How to Determine If It’s Better to Hire a Living Trust Attorney
While setting up a revocable living trust sounds fairly easy, that’s not always the case. Anyone with a unique situation and/or have a complex or large estate are better off hiring a trust attorney to help them.
People also tend to hire an attorney if they plan on skipping a generation or need help transferring your assets to the trust. It’s also a good idea to hire a living trust attorney if you have beneficiaries with special needs or receive government assistance.
Those with high dollar life insurance policies are better off working with an attorney.
A living trust lawyer can answer your questions and help you create a complicated living trust.
How to Find a Good Living Trust Attorney
Find a trust attorney who has experience creating revocable living trusts. Estate planning experience is not enough.
And make sure you feel comfortable with them. You’re sharing your personal and financial situation with them so find someone you like and trust.
Before you begin, always discuss fees, so you find someone who charges a fair price.
The more you educate yourself on what you need to create a living trust, the easier the process becomes. It will also make it easier to decide if you really need an attorney to help you or if it’s something you can tackle on your own.
We’d like to help. Click here to learn what you need to consider before you hire an attorney.