We hear that living trusts are hot these days, even when people don’t quite know what they are.
“People often come into my office and say, ‘I want one,’” says elder law attorney Ronald Fatoullah. “I’ll ask them ‘Do you know what a living trust is,’ and they’ll say ‘I don’t know, but a friend of mine has one and I want one too.’”
Through the trust, you can determine which of your assets goes to whom, and when, without having to go through probate, or the legal process of resolving a claim against your will. The trust is set up as a legal entity similar to a corporation and you have the power to decide who will administer your assets.
How to Get Started
If you want to put money aside for the next generation in a living trust, here are a few tips:
1. Talk to your family about your plans. It may be too early to tell a spendthrift child that they’re not getting the house, but that the trust is getting it. Tell them that you’re looking at ways to provide for them after you die and be open to their input.
2. Find a good lawyer. Building your living trust will take more than a pen and paper. According to John R. Bennett, head of Bennett Trust Estate & Elderlaw in Valdosta, Ga., it is important for people to find an attorney who takes what he calls a “counseling-oriented” approach to estate planning, rather than someone who just prints out a bunch of forms for you to sign.
One good place to start your attorney search is the National Academy of Elder Law Attorneys.
3. Be open with your estate planner. A living trust is your legacy, so don’t hold your tongue when it comes to deciding who gets what part of your assets and when. Being upfront in the first stages of estate planning will lessen the chances of disputes when you’re gone.
4. Don’t be put off by costs. According to Bennett, the cost of a will is generally in the neighborhood of $750, while living trusts could cost around $5,000. Though wills tend to be a more cost effective means of protecting your legacy, they can keep your family in probate court for months, take thousands in eventual legal fees out of the estate and prevent anyone from selling off devalued assets such as stock or real estate.
The trust eliminates these problems by naming a trustee who has the authority to manage your assets from day one.
5. Update your trust regularly. “We see so many families with children from one marriage and others from later ones,” says Bennett. “So working out something that’s fair can be difficult.” Though it’s less so if you keep your trust up to date.
A living trust takes the guesswork out of your children’s hands and leaves you in charge of how your assets will be distributed. However, you have to stay on top of it. Make appointments with your lawyer or estate planner every year to find out if your living trust still works for you and your family.
6. Remember to take care of yourself. Your living trust isn’t just for your kids. You can also use the trust to pay for your long-term care or that of your spouse. So, if you’re concerned about increasing health care costs, talk to your planner about how your living trust can help you.
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