Drafting a Living Trust? 3 Questions to Answer
When drafting a living trust, there are a number of considerations one must make.
A living trust is a popular way to transfer assets to a trust during the trust creator's lifetime -- and to avoid probate proceedings after the trust creator has died. People also create living trusts to reduce taxes, ensure financial privacy, and regulate the use of assets (in case they become incapacitated).
Here are three questions you'll need to ask yourself when drafting a living trust:
- What's going into the trust? A living trust can hold a variety of property, including valuable personal items, copyrights, stocks and bonds, and real estate that you now hold either individually or jointly with someone else. If you're married, check whether you live in a separate or community property state before deciding what kind of trust to create -- joint versus individual living trust -- and what property to put into it. If you're not sure where to start, begin with your most valuable property.
- Who will be your successor trustee? If you're drafting a living trust, you (the trust creator) will likely name yourself as the trustee. But after your death, you'll need a successor trustee -- someone who can manage your trust and carry out your wishes. If you're married, you will likely select your spouse. In case your successor trustee passes away or becomes incapacitated, it's important to have an alternate successor trustee. Above all, make sure your successor trustee is someone (trust)worthy!
- Are extra steps needed? Just listing property in your trust document may not be enough. For example, real estate transfers to living trusts require added attention. As a first step, you will need to transfer title of the property from yourself (owner) to yourself as trustee of your living trust. This may require some extra paperwork, depending on the local laws where your property is located. There may be additional real estate issues to consider as well, such as property taxes, tax breaks, insurance policies, mortgages, and partial interests (like time shares).
If you're drafting a living trust, these are just some of the first questions you'll want to ask yourself. Because each person's estate planning needs are different, it's wise to consult an experienced estate planning attorney near you to discuss your unique situation.