A living trust is a safeguard to protect your loved ones from probate upon your death and allows you to determine exactly what happens to your assets once you are gone. Furthermore, it will give you the opportunity to appoint a third party to make any decisions about your estate should you be unable to do so yourself. The steps below will lead you through the most important aspects of creating a living trust.
- Determining the advantages. The first step is determining why you want a living trust and what advantages it will have for you and/or your family. There are several advantages associated with creating a living trust and some may be more important to you than others. These advantages include:
- Your loved ones can avoid probate after your death, which will lead to the next four advantages.
- Privacy from the courts and public.
- Allows you to assume the most control over what happens to your estate when you pass on.
- Allows you to dodge all or most estate taxes.
- Allows you to appoint a third party to make decisions about your estate if you are incapacitated (mentally or physically) and unable to attend to important matters yourself.
- Spouses can create separate or joint living trusts. Another important decision that you will want to make regarding your trust is whether or not you and your spouse will want to create separate living trusts or a joint document. If either of you has children from a prior relationship whom you want to leave specific items to or if you each have many separate assets, then you may want to consider separate living trusts. Otherwise, a joint living trust may be easier and less complicated for you both.
- Gather your documentation. You will need to know who you want your trustee and beneficiaries to be. Other than family, you may also want to consider close friends, charities, or your church when dividing up your assets. You will also need to make a list of all of your assets and the corresponding values. Be sure not to leave anything out! Although you can change your trust if need be, it is best to be as accurate as possible during the initial drafting.
- Choose a lawyer. Once you have decided on the specifics of your living trust, you then need to find a suitable attorney who specializes in estate planning and has experience with tax and trust laws. This attorney will be able to lead you smoothly through the drafting of your living trust, while ensuring that it is legally binding and that no loopholes are left open.
- Draft your document. This is the final phase of creating a living trust. It is where all your research and time spent will pay off by the reassurance that your family and assets will now be protected from probate and that your estate will be divided according to your wishes.
Taking advantage of a living trust and completing these five outlined steps will help you have as much control as possible over what belongs to you. You have worked hard to build your estate and to have something to pass on to your children and grandchildren. A living trust is your chance to protect it.