So, you’ve decided that creating an estate plan with a living trust is the right choice for you. How do you move forward? Let’s discuss briefly.
Establishing a living trust requires the assistance of an estate attorney and will often be created in conjunction with your will, an advance medical directive, and financial powers of attorney. Attorney fees vary by firm. I’ve seen them beginning around $2,500 and rising with the complexity of the planning. Before meeting with the attorney, gather your complete financial account information and list of assets. Consider who you will designate as beneficiaries and in what percentages assets will be distributed.
You will need to appoint a successor trustee to administer the trust if you pass. This person could be a trusted family member or friend, a bank, or a trust company. All trustees have a legal fiduciary duty to the beneficiaries of the trust. While banks and trust companies charge significant fees for their trust administration services, they provide the greatest assurance of continuity since they will manage the trust as an entity rather than a single person (like your sibling). If your estate is sizeable, somewhat complex, or will continue after you passing for some time (i.e. you have young children) engaging a bank or trust company is something you will likely want to explore.
Once the trust is executed you will transfer title of your assets. By funding the trust you begin to actually remove the assets from the potential probate process. If you own real property, such as a home, a new deed will need to be executed that includes trust language. You will maintain ownership of your financial accounts but additional language will be included in the documentation to indicate that the assets are held in trust. You’ll want to periodically review ownership of accounts to coordinate as many of them as possible with your trust.
Since you maintain ownership to the assets the trust does not need to file a tax return. However, if you pass away and the trust holds assets that earn undistributed income the successor trustee will need to file an income tax return on its behalf. You can save them a step by applying for your trust’s free tax ID number (EIN) here.
Now it’s your turn. If you have further questions or you’d like a referral to an experienced attorney please drop me an email. I’d be happy to point you in a helpful direction.