Questions to Ask While Creating a Living Trust
With living trusts, you typically transfer ownership of assets to a trustee and provide instructions on what should happen after your death. A living trust is just a way of organizing your property during the time that you are still alive. The primary purpose of the trust arrangement is to protect assets from all taxes and creditor claims that would come with a public probate process.
By transferring ownership of your assets into a trust, you also avoid potential tax liabilities for those same properties and any creditor claims against them.
Another important function that comes from establishing this type of estate planning vehicle is having more control over how and when the property is distributed among beneficiaries.
However, before you create a living trust, it is important to have answers to some major questions. Here are some of the most important questions to ask before establishing a living trust.
1. Who Do I Want to Manage My Property?
While the traditional purpose of a living trust is to transfer property and assets, we often use our living trusts to establish a better estate plan administration. If you are not able to oversee the management of your property, it may become impossible for you to avoid unnecessary costs and hassle by obtaining legal representation after your death.
You may also want to name a successor trustee who can handle the transfer of property in case your first trustee cannot fulfill their duties. It would be best to plan who the successor trustee will be and what you want them to do.
2. What Assets Do I Want to Protect?
This is a critical question to ask yourself when looking at your estate plan. Know which type of property you want to preserve and how your living trust is going to handle the transfer of those properties, especially if you are going to name a successor trustee. You will want to ensure that you will not leave any assets unprotected and susceptible to claims by creditors or the IRS. So you will need to decide which assets you want to protect, such as property, bank accounts, stocks, bonds, and investments.
3. Am I Concerned My Children Won't Manage My Assets Responsibly After I Pass?
If you have children, they may not be able to handle your assets after you die. Having a living trust to manage your property and assets can solve this problem and create more estate planning security for all of your children. If you want a successor trustee to manage all of your properties, be very clear that s/he will do so in accordance with the instructions in the living trust that is filed on their behalf.
4. Do I Anticipate Family Conflict After I Pass Away?
Sometimes, family members are so competitive that they fight over the assets you've accumulated during your lifetime. A living trust can help to avoid that eventuality by ensuring that the assets you want to pass along will be transferred and distributed to beneficiaries, as specified in the trust terms. This can be done by naming a trustee to oversee your assets. A real estate lawyer can also help you create a specific set of living trust terms to minimize conflict among family members.
5. Am I Likely to Make Changes to my Estate Plan During My Lifetime?
While many people think that the living trust is a static estate plan that is not flexible, you can create any changes to your living trust at any time. You are free to make minor changes, such as changing beneficiary designations or reallocating assets as you deem fit.
However, you should remember that this type of estate planning vehicle is just a mechanism for moving your assets to beneficiaries while you are still alive, and it should not weigh heavily on your ultimate decision on how much control over your property you want after your death.
Keep in mind that if you decide to create a more flexible living trust, this can be done by creating a revocable living trust and adding additional beneficiaries later.
6. How Important Is Privacy to Me?
Sometimes, we are concerned about the privacy of our property in public probate. This is especially true of assets that we acquired through business sales, transfers from retirement plans, or inheritances. These are often personal assets that do not need to be on display.
In many cases, a living trust can be used as a private probate mechanism to accomplish privacy goals while still maintaining ease of distribution following death. As long as you keep in mind that it is just a placeholder until your death and not the final word on your estate planning wishes, you should consider the privacy benefits of this property management tool.
7. Will My Estate be Subject to Federal or State Taxes?
Taxes may have a significant impact on the distribution of your estate. A living trust can help minimize taxes and ensure your assets are distributed as efficiently as possible.
However, it is important to understand the tax laws in your state and federal laws so that you can plan accordingly and make sure that your living trust is set up to handle any tax issues. A real estate lawyer can provide guidance on how to set up your living trust to minimize the impact of taxes on the distribution of your property.
8. What Do I Want My Living Trust to Accomplish?
It is essential to clearly understand your ultimate goals for your living trust before you start drafting it. Are you primarily concerned with privacy and avoiding probate? Are you worried about potential conflicts among family members after your death? Are there specific assets or properties you want to ensure are distributed to specific beneficiaries? Answering these questions can help you create a living trust that aligns with your goals and wishes for your estate.
A real estate lawyer can ensure that your living trust accomplishes what you want it to. There are many things to think about when you make a living trust. You need to consider things that could cause problems between family members, taxes, and privacy. You also need to be able to make changes in the future if you need to. It is important to talk to a real estate lawyer so they can help you make sure your living trust does what you want it to do and so it does not cause any problems.
Creating a living trust involves thinking about different things that could happen, like if your family members fight with each other or how much money you will have to pay in taxes. You also have to think about if you want people to know what is in the trust and if you want to be able to change the trust later on. It is important to talk to a real estate lawyer before making the trust so that everything goes according to what you want and so that there are no surprises.
Remember to regularly review and update your trust to ensure it continues to meet your needs.
Disclaimer: This material is provided for informational purposes only. The provision of this material does not create an attorney-client relationship between the firm and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this newsletter are not a substitute for legal counsel. Do not take action in reliance on the contents of this material without seeking the advice of counsel.
The information contained in this blog may or may not reflect the most current legal developments. Accordingly, information in this blog is not promised or guaranteed to be correct or complete, and should not be relied upon as such. Readers should conduct their own appropriate legal research.
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