Maybe you’re thinking about how to better manage your property, or you want to make sure your family will be taken care of after you’re gone. If you’re having these thoughts, you might want to think about setting up a trust. A trust is basically a transfer of legal title from the owner (the grantor, trustor, or settlor) to an institution or person (a trustee). The trustee then administers the trust according to the trust terms for the benefit of a beneficiary. There are various factors to consider when setting up a trust. These factors include the size of the estate, the age, and marital status of the grantor. When considering an estate plan, many people contemplate whether a trust is necessary or a will alone is suitable. The choice is often based on cost. Depending on whether an attorney is hired, a trust can be considerably more costly than a will. The key is finding a balance between cost and creating an estate plan that fits your family’s needs.
Living Trusts
A living trust is a legal entity that holds title to and manages assets for an intended beneficiary. A living trust is distinguishable from other trusts in that you, as the grantor, can make changes to the trust or revoke it entirely during your lifetime. You can also act as the initial trustee of your living trust. Living trusts are most often used to avoid the probate process that comes along with passing property through a will. Because assets are owned by the trust, and not by you, they pass by the terms of the trust upon your death, making probate unnecessary.
Hiring an Attorney
Trusts are complicated documents and estate planning attorneys can help you navigate through the legal nuances. Attorney’s fees are generally the bulk of the cost associated with creating a trust. The cost for an attorney to draft a living trust can range from $1,000 to $1,500 for individuals and $1,200 to $2,500 for married couples. These are only estimates; legal fees vary based on the attorney and the circumstances. Rates may differ depending on the state in which you live. The cost of hiring an attorney to draft a trust can be five to six times that of drafting a will.
Living Trust as Part of an Estate Plan
If you decide that hiring an attorney is the way to go, you will likely get more for your money than just the living trust. Living trusts are most often used as part of a comprehensive estate plan that can include wills, powers of attorney and health care directives. You should find out exactly what is included in the attorney’s fee prior to agreeing to any proposal
Titling Assets to the Trust
In order to pass through the trust and avoid probate, assets must be re-titled into the name of the trust. For instance, if you want to place your home in the trust, you must change the deed so that the trust is named as owner. Once the deed is changed, it should be recorded with the registrar of deeds, and is subject to the same fees as any real estate transaction. These fees vary by state. You can check with your local registrar of deeds for your state’s fees associated with a deed transfer. Whether or not you choose to hire an attorney to draft your living trust, you will be responsible for the expense of titling assets to the trust. A living trust is an estate planning document created during one’s lifetime. A revocable living trust goes into effect during one’s lifetime and provides a way to manage one’s assets during his/her lifetime and to dispose of assets after they pass away. There are many reasons a living trust is preferable to a last will and testament. For example, when you create a living trust, you can avoid the time and expense associated with probate. While the estate’s assets are in probate, they may be frozen – a living trust avoids this as well. Individuals also choose to make a living trust to minimize tax consequences and for privacy concerns.
Basics of A Living Trust
A revocable living trust includes the following:
• The name of maker of the trust (known as the grantor, settler and/or trustor);
• The name of the individual responsible for managing the trust and its assets (the trustee – this is typically yourself);
• The name of the individual who will take over the responsibility of managing the trust after you pass away (the successor trustee);
• The names of the individuals or organizations you leave your trust property to (the beneficiaries);
• The name of the individual in charge of managing the assets you leave to minor beneficiaries (also called the trustee).
As long as your living trust contains these basic elements, you can make your own living trust. Some choose to hire a lawyer, and more specifically, an estate planning attorney to prepare their estate planning documents, but this is not always necessary. Many individuals are successful in making a living trust on their own without the use of a living trust attorney. If you are interested in making your own living trust, be sure to sign the trust document you created before a notary public and look up the law in your state as to whether additional witnesses are required. You will then need to fund the trust by transferring your assets into the trust. Some states require real estate deed transfer documents to be prepared by an attorney so be sure to check with your local land records office for this as well.
Benefits and Drawbacks of Hiring an Estate Planning Lawyer
Individuals with complex estate planning needs should consider hiring an attorney to prepare their living trust. You may consider hiring an living trust lawyer if you’ve a complex estate plan. For example if your plan includes:
• generation skipping
• conditions to beneficiaries,
• beneficiaries with special needs or receiving government assistance,
• high dollar life insurance policies, and
• assistance with trust funding (which is the transferring of your assets to the trust)
One of the most significant drawbacks to hiring an attorney is the cost of retaining an estate planning attorney or firm to prepare your living trust. If you are interested in creating a living trust, a great first step is to do a little research to familiarize yourself with the basics and determine whether you are able to prepare your estate planning documents on your own or if you would benefit from hiring an attorney.
A trust is a way of holding and managing property, whereby the person setting up the trust (called the grantor, settlor, or trustor) transfers property to a trustee, who manages the property for the benefit of others (called beneficiaries). A trust is used as part of a comprehensive estate plan, along with other documents such as a will, power of attorney, and healthcare power of attorney.
Why to Set Up a Trust
A trust is set up to achieve certain benefits that cannot be achieved with a will. These can include:
• Avoiding probate
• Avoiding or delaying taxes
• Protecting your assets from creditors of both you and your beneficiaries
• Maintaining privacy regarding your assets
• Exercising greater control over your assets than might be achieved with an ordinary will
• Allowing you to qualify for certain benefits, such as Medicaid for long-term care
• Providing financial support for a person with a disability, while allowing the person to receive government disability benefits
If you are looking to achieve one or more of these goals, you should consider setting up a trust. A will and a living trust do not serve exactly the same function. Depending upon your situation, you may only need a will. But if you decide that you need a living trust, you will also need a will. It’s important to know which choice is better for you.
How to Set Up a Trust
• Creating the Trust Agreement: The grantor creates a trust agreement, which is a legal document that designates the grantor, the trustee, and the beneficiaries, and outlines how the trust assets are to be managed and distributed. Part of this step is deciding who you want to name as beneficiaries, how you want the trust income and assets distributed to them, and who you want to name as trustee (or trustees).
• Funding the Trust: The second step, called funding the trust, is for the grantor to transfer assets to the trust. A trust agreement is worthless unless the trust is funded. How this is done depends upon the nature of the property:
• Real estate: To transfer real estate, the grantor executes a deed that transfers the title to the property to the trust.
• Personal property with a title document: Some assets, such motor vehicles, boats, RVs, airplanes, and mobile homes (also known as modular or manufactured homes) have some type of title document, which can be transferred to the trust. This can also be done with stocks and bonds.
• Other personal property: All other property without a title document can be transferred by simply writing a description of the property on a piece of paper (such as “all of my household goods,” or “my coin collection”), and making a note that it is being transferred to the trust.
Duration to Set up a Trust
In general, it is possible to set up a functioning trust in a few days to a couple of weeks. If a lawyer creates your trust, the time will vary depending upon how quickly you can get an appointment, how quickly you can get the required information submitted, and how long it takes the lawyer to create the trust agreement and take any action needed to fund the trust. If you create your own trust, the time will also vary according to how quickly you can become educated about trusts.
How Much It Costs to Set Up a Trust
If a lawyer sets up your trust, it will likely cost from $1,000 to $7,000, depending upon the complexity of your financial situation. For example, some situations might require a revocable trust for some assets, and an irrevocable trust for other assets. A comprehensive estate plan (which may include a will, power of attorney, living will, healthcare power of attorney, and changing how some assets are owned) will cost more than a single trust document. While you can make a trust by yourself using self-help books or online guides often, creating a trust document is confusing and complex. Having the right support, either through an online service or attorney review of your trust, can give you the confidence you need to know you’re setting it up correctly.
Setting Up a Trust without an Attorney
Setting up a trust, unlike leaving your assets to someone via will, ensures that your assets are used precisely as you intend them to be for the beneficiaries of the trust. For extensive estates with a large variety of assets, this can be a complicated process requiring the use of estate planners, financial managers and attorneys to make certain the trust parameters are fully fleshed out. For those with less extensive estates, you can forgo the expert help, instead using a living trust kit. With the trust kit you use prepared document templates, providing information specific to your financial holdings and desires. The document produced is legally binding, and its use saves you legal fees when you feel an attorney’s advice is unnecessary. The living trust kit contains trust document templates with boilerplate language that enables you to set up a simple trust without outside assistance. Find a software-based version if possible, as it will allow you to follow on-screen prompts for the entry of information pertaining to the trust, explaining the process of establishing the trust as you fill out the forms. Determine if you wish to create a living trust that takes effect before your death or a deceased trust that only begins after your estate goes through probate. If you choose a living trust you’ll also need to decide between creating a revocable or irrevocable trust. With an irrevocable trust you’ll need the agreement of the beneficiaries as well as the trustees to make any changes, whereas a revocable trust is dissolvable with the issuance of a letter of revocation, allowing more leeway in making any modifications necessary.
Legal Assistance
Individuals who are considering drafting a trust or a will may wish to consult with an estate planning lawyer. He or she can explain the advantages of using a trust as well as a will. He or she can make recommendations based on the specific considerations of the client. He or she may even recommend using both documents, such as by using a pour-over will that places any property owned at the time of the testator’s death into the trust.
