- slide 1 of 4
Why Create a Trust
A trust is used to pass assets on to the next generation or several generations in a way you would direct if you were alive. A trust avoids probate time and costs, getting assets to beneficiaries faster. You get to maintain control of your assets while alive when you establsih a revocable living trust. Once you pass away, the trust becomes irrevocable. You are the trustee while you are alive and a successor trust manages the assets upon your death.
The trust might simply list who gets what, down to Aunt Bea's Depression Glass. A more complex trust might outline who gets what and under what conditions. For example, you might leave part of your estate to your grandchildren. However, they might only get funds for college or after graduating college. Those are common requirements listed. While funds remain in the trust, the trustee must manage them to preserve and grow the trust as much as possible within the guidelines of the trust document. "Do I need a laywer to establish a living trust?" all boils down to how complex your estate plan is.
- slide 2 of 4
Creating Your Own
For a simple trust, you can use a self-help book and the many online resources available for trust templates and documents. This might save you one to two thousand dollars you would otherwise pay an attorney. The basic components of the trust include the name of the person creating the trust, the trustee's name and contact information as well as the successor trustee's information. It also lists the assets the trust will hold as well as the beneficiaries. A simple trust would list beneficiaries with either specific items inherited or with percentages inherited.
Once you have outlined your wishes for your estate upon your death, you need to sign the trust in front of a notary public. Once signed, you will obtain a Tax Identificaion Number from the Internal Revenue Service. This is done through a phone call; the Form SS-4 is accepted telephonically. Once you have the trust TIN, you can open a bank account under the trust name and transfer all assets into the trust. Real estate deed, bank accounts and brokerage assets must be titled with the trust name to be considered part of the trust and avoid probate.
- slide 3 of 4
When To Hire A Lawyer
When looking at the work involved, you might decide that indeed you do, "I need a lawyer to establish a living trust." If your estate is very complex, it might be worth paying a few thousand dollars for an estate planning attorney to not only create the trust but review all assets and look for ways to preserve the estate. As of 2011, the federal trasnfer tax is 35 percent on estates over $5 million. Estates under this threshold have no transfer taxes. If your estate is in the transfer tax realm, life insurance, generation skipping trusts and IRA trusts might become part of the overall plan. Speak with your tax adviser to see if you are in a situation where a more sophisticated eye will help you pass more money on to your next of kin.
- slide 4 of 4
- FindLaw, Do I need to hire a living trust lawyer? : http://estate.findlaw.com/estate-planning/trusts/need-lawyer-for-living-trust.html
- Investopedia, Steven Merkel,CFP®, ChFC, Establishing A Revocable Living Trust: http://www.investopedia.com/articles/pf/06/revocablelivingtrust.asp