Trusts can be one of the best ways to distribute your assets after death, as millions of Americans have discovered over the last several decades. Sure, the Last Will and Testament remains a popular choice for those with relatively simple estates, but even many of those individuals could benefit from the advantages that only a trust can provide. As for those with more complex estates, the trust is something that the almost cannot do without. Of course, it’s not enough to just create a trust to transfer your assets to heirs when you die. If you’re going to have a revocable living trust, you should learn now to maximize its benefits.
Make Proper Use of the Trustee and Beneficiary Designations
If you’re like many people who use revocable trusts, you’ll probably want to maintain control over the assets in the trust by naming yourself as its trustee – and maybe even its beneficiary too. You can do that with this type of trust, and that’s one of the advantages that makes it so very attractive to so many people. When you name yourself as trustee, you get to continue to make decisions about how the assets get used. You can sell assets, purchase new ones, and continue to enjoy the use of everything in the trust.
Contrast that with the irrevocable trust, where the assets that you place in the trust are out of your reach forever. While you can still enjoy the income derived from that irrevocable trust, those assets can never be reclaimed. With the revocable trust, you can revoke the document at any time, end the trust, and regain full ownership of the assets. For anyone who’s more than a little leery about losing control over their wealth, the revocable trust is the best solution to their trust needs.
Make Sure It Can Handle Incapacity
For most people who suffer and injury or illness that leaves them incapacitated, there are often few options. Too many people have never bothered to create the durable power of attorney documents they need to ensure that there’s someone designated to make their important financial decisions for them when they can no longer represent their own interests. That often leaves those individuals at the mercy of probate and guardianship courts, with court-appointed guardians or conservators managing their estates and making decisions on their behalf.
The revocable trust can be an even better solution than a durable power of attorney. When you name a successor trustee to take over your trust upon your death or incapacitation, you ensure that there is continuity in your financial decision-making should something happen to you. That means no wasted time in courtrooms arguing over guardianship, no legal debates over what your durable power of attorney means, and a greater likelihood of legal acceptance for the trustee’s decisions. You can even have a durable power of attorney set up to allow other assets to be transferred into the trust for safekeeping if you’re ever incapacitated.
Fund it Properly
If you want to maximize the benefits you receive from your revocable trust, be sure to fund it. In addition to simple trust execution errors – often the result of improperly-created do-it-yourself trusts – the biggest problem most trusts face involves improper funding. Remember, trusts are designed to transfer assets from one person to another. If there are no assets in the trust, your trust is worthless. You need to ensure that your wealth is properly transferred to the trust, and that means retitling accounts and property. If you have any questions about that process, be sure to ask your estate planning attorney.
Make Sure that Probate is Avoided
If you’re intent on keeping your assets out of probate, there are a few things to understand. First, your assets will only escape the probate process when they have another way of being transferred to their new owners. If you’re using your trust to accomplish that goal, then the assets need to be in the trust. Don’t make the mistake of assuming that the mere act of creating a trust is enough to protect all your assets from court interference. Chances are that you will die with at least some wealth not yet transferred into your trust.
You can remedy that by creating a pour-over will. Unlike most wills, this type of will is not designed to transfer assets to your heirs, but instead enables them to be transferred to your trust. The pour-over will provides a way for any property that you failed to transfer to the trust to be retitled so that it can join other trust assets and be distributed by the trustee.
Make Your Trust Terms Work
While your trust can help your assets avoid the probate process, that doesn’t mean that it eliminates your obligation to repay debts and meet tax obligations when you die. Your trustee may have to delay some payments to your heirs to ensure that all those outstanding debts can be paid. If estate taxes might be due, that issue needs to be resolved as well. It’s helpful to ensure that your trust terms provide the right instructions and discretion to the trustee so that he or she understands how to balance those tax and debt concerns with the need to make distributions to heirs. When handled correctly, the distribution of assets through a trust can be much quicker than the typical probate process.
Get the Right Advice and Assistance
Of course, the most important thing that you can do to make the most of your revocable living trust is to rely on an experienced trusts attorney to help you create and fund your trust document. At Frank & Kraft, Attorneys at Law, our experts can help to create the right trust for your needs and help you with critical tasks like funding and trustee selection. We’ll work with you to ensure that you have the trust you need to meet your most complex concerns, so that your legacy planning goals can be achieved. To find out more about how we can help you with your trust needs, call today at (317) 684-1100, or contact us at our website.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.