In the simples possible terms, this is the creation of a separate entity – My Living Trust, for example – which assumes titular ownership of all of your assets during your lifetime and which is under your control as Trustee. Anyone whom you wish to benefit equally in the distribution of the assets is listed as a subsidiary Trustee and, upon your death, Trust assets automatically devolve to these individuals (or other entities) without being required to go through probate. Though this is the simplest way of understanding how a Trust works, remember that, depending upon your assets and financial/personal situation, there may also be other avenues of estate planning of benefit to you and your family, and that it is best to get the advice of a reputable estate planner and/or lawyer before proceeding with any legal actions concerning your estate. Here are a few things to keep in mind about Trusts:
1) The words Revocable Living Trust describe exactly why they have become so popular – it is a way of retaining control over all your assets while your are still living, can be revoked by you at any time, and yet basically places your entire estate or any part of it you decide to include in “Trust” for your beneficiaries after death. If your wishes for the distribution of your estate are more complicated than that, you will need to consult your lawyer about other options.
2) Many assets, including bank accounts, your home and your car, can be designated as POD or “Payable On Death” to one or more individuals, thus also avoiding probate and perhaps obviating the need for a Living Trust. These rules vary from state to state, and you should check with your lawyer to make sure that these options can be exercised and if the consequences vary from establishing a trust.
3) Normally, the establishment of a Revocable Living Trust also requires the establishment of a successor Trustee/ Trustees (which in many cases is the beneficiary, for example, in the case of a spouse when there are non-marital assets) as well as a Power of Attorney, Living Will and Last Will and Testament. These documents together basically seek to deal with any contingencies – a Power of Attorney designates a person or entity to be in charge of your assets should you become incapacitated and unable to handle your own affairs, a Living Will allows you to exercise your right to refuse extraordinary resuscitation measures and often designates an individual responsible for “pulling the plug” should you be on extended life support and of course, your Last Will is not only your final opportunity to communicate with your loved ones regarding your wishes concerning your assets but also can designate your wishes for disposal of any property not covered by the Trust, Again, this is the simplest way of understanding these documents, and they can contain many variations and contingencies which should be determined with the help of a qualified legal representative.
4) Remember that a Revocable Living Trust is different from a Trust Account – a Trust Account being a specific financial account set up to hold monies or assets in trust for a variety of reasons. For example, lawyers often have a number of Trust Accounts set up to receive retainers and other fees from clients for work that has not yet been performed, or to receive settlements, which then will be disbursed to clients.
5) Whatever type of retirement planning you decide to do, do not procrastinate. It is better for both you and your loved ones to have these matters clearly delineated with no confusion whether you’re starting out or anticipating the end of your life.
6) In today’s complicated financial world, the same thing applies to your finances as applies to your health – get a second opinion. If you do not understand some element of your estate planning, consult another professional. Also, don’t forget that your local bookstore, library or college and university has information and classes that can help you get a foundation of knowledge about estate planning.