The Importance of Setting up a Living Trust

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Setting up your living trust is easier than you might think – a great thing considering how important it is to have one. No matter the value of your trust, it is critical that you have a plan for your assets after your death. Not only will it ensure that your wishes are followed, but it also provides relief for your family.

Below we provided detail in what to keep in mind when setting up your own trust.


Shared vs. Individual Trusts

You have the option of setting up either two individual trusts, or a shared trust if you are married or in a domestic partnership. An individual trust is for property that only you own whereas a shared trust is for property that is co-owned. In the case that together you and your partner own most of your property together, a shared trust may make the most sense.


What Assets to Include

It is not necessary to include all of your property and you will likely only want to include your most valuable assets. Take inventory and make a list of everything you own, including both tangible items (i.e. cars and homes) and intangible items (i.e. stocks). Doing so will clarify your estate and make it easier to determine your wishes for each asset.


Who Will Inherit your Estate?

For most people, choosing family members, friends or charities to inherit property is easy. Make a plan for who you would like to receive your assets, and specifically what assets you would like them to receive. After you make your first choices, don’t forget to choose alternate (contingent) beneficiaries too.


Identifying a Successor Trustee

Your trust must name someone to serve as “successor trustee” to distribute trust property to the beneficiaries after you have died. Many people choose a grown son or daughter, other relative or close friend to serve as successor trustee. It’s perfectly legal and quite common to name a trust beneficiary—that is, someone who will receive trust property after your death. Once you’ve made your choice, discuss it with the person you have in mind to make sure he or she is willing to take on this responsibility.


Managing Minors

If children or young adults might inherit trust property, you should choose an adult to manage whatever they inherit. To give that person authority over the child’s property, you can make him or her a property guardian, a property custodian under a law called the Uniform Transfers to Minors Act (UTMA), or a trustee.


Creating your Trust Document

You can create a living trust document (formally known as a Declaration of Trust or trust instrument) yourself as long as you have good information and help. Nolo’s Living Trust and Quicken WillMaker are two products available to assist you with this process. Within each tool, you answer a series of questions about yourself and your property, then the programs produce a living trust for you. If feel confident enough to create a living trust on your own, Nolo’s book Make Your Own Living Trust by Denis Clifford (Nolo), offers background information, trust forms and complete instructions.

If you don’t want to make your own trust or if you need more than a simple probate-avoidance trust, you can work with an attorney to draw up a trust to meet your specific needs. After making your trust document, you (and your spouse, if you made a trust together) must sign it in front of a notary public.


The Deal on Probate

A living trust can also avoid probate in most states. Probate is an expensive and long process, which can last 18 months in some states. During this time, the executor will have to hire a probate attorney, therefore using the assets of the estate to pay for legal costs. In addition, the executor will have to continue with payments such as mortgage, property taxes etc. until the probate court releases the estate to the heirs.


Transfer Title of Property to Yourself

This is a crucial step that, unfortunately, some people never take. To make your trust effective, you must hold title to trust property in your name as trustee. For example, if John Smith wants to hold real estate in his trust, he must prepare and sign a new deed transferring the real estate to “John Smith, trustee of the John Smith Revocable Living Trust dated June 4, 20xx.”


Storing your Trust

While it is not necessary to file your trust document with a court or any government agency, it is recommended to keep it in a safe place such as a small fireproof home safe. Be sure to tell your successor trustee where the trust document is and how to gain access when the time comes. Lastly, give a copy to your financial advisor.

When it comes to setting up a trust, touching base with a financial advisor is a great place to start.

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The content is developed from sources believed to be providing accurate information.

The information in this material is not intended as tax or legal advice. Trost Financial Consulting and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

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