Living Trust for leaving your children the property you want them to have

By Jessica Suotmaa 0

Many of you have heard estate planners state that you should have a “trust” to protect your assets. You may have heard of the terms “revocable” and “irrevocable”, or seen an ad for setting up a “living trust”. But what does all this mean?  In this article, we will first explain what a revocable living trust is in layman terms, then inform you why you need a revocable living trust too.

In order to fully explain what the popular term, “living trust”, or “revocable living trust” means, we need to begin by defining each word in the term.

What is a Trust?

A trust is a legal document that separates designated property from the rest of your estate for certain people.  It is similar to a will, but a will determines how your property will be divided upon your death, whereas a trust takes your property out of your hands while you are still alive.

What is a Living Trust?

As such, a living trust is simply a trust you set up while you are alive. Similarly, “revocable” simply means that the terms of the trust can be changed by the creator of the trust.

What is an Irrevocable Trust?

Once you pass away, the trust can no longer be changed by you and automatically becomes “irrevocable”, or unchangeable.

Why do I need a Living Trust?

If you do not have a trust, or a will, your property and assets will become your “estate”. With no designated recipients, your estate will be handed to the State and it will be up to a Judge to decide who will receive what part of your property.  This is called Probate.

Having a trust can prevent an estate from going to probate. Having a trust can also prevent disputes among your family and other relations leading to probate if they disagree with the contents of your will.

So what?

You might wonder why creating a living trust matters, so here’s why in a nutshell:

  • Probate is public information, meaning your assets will become known to all. Having a trust will ensure confidentiality of who gets what and when even after your death.
  • Your relatives might end up wasting a lot of money on legal fees fighting over your assets in probate, leaving little left.
  • Setting up a trust allows you to assign a “trustee”, or person who would manage your property on your behalf for the purpose you designate. For example, you could leave gifts to a child or a person of special needs have someone else manage those assets to ensure the trust assets are put to good use.
  • You can assign a co-trustee to make decisions on your behalf if you become incapacitated.
  • If you prefer assigning yourself as the trustee, you can select a successor trustee to become the new trustee upon your death.
  • With a trust, you can assign guardians to your children or managers for the property you leave your children.
  • Using a trust, you can designate how you want your debts to be paid upon your death.

What do I need to create a Revocable Living Trust?

It depends on the type of assets you have. You would need a trust document notarized by a notary public.  You would need to list all the property you would like included in the trust. Real property would need to be re-titled under the name of the trust.  If you need assistance in designing a trust, or creating a trust, call Lum Law Group for quality advice!

10 Perils of DIY Estate Planning

By Lisa 0

You might be wondering why, for decades, lawyers everywhere have been insisting that you consult their services when planning the will of your estate. Many people don’t understand what kind of input a lawyer has to give on estate planning or why it is important, and they try to plan their own estate and write their own will without understanding that doing so puts their assets and finances at risk. The following are ten perils of do it yourself (DIY) estate planning.

Taxation Challenges

Estate owners and other people who own different types of properties are always complaining of the high taxes they are charged. Taxation in estate planning has been uncertain, sometimes causing a lot of confusion in the industry. Reports have even suggested that lawyers are struggling to cope with the changing taxation rules when they want to help keep their clients from paying too many taxes. Doing it yourself could end up complicating your taxation benefits by fixing you in a situation where you are supposed to pay taxes, but you could have avoided that by using the services of a person who is knowledgeable in taxation industry.

Ambiguity in the Legal Language

Legal language is a complex means of communication; lawyers go to law school specifically to learn how to read, understand, and apply laws. The documents produced in estate planning are legal documents and can be used in the court of law for the settlement of disputes. However, to those who are not trained to read the law, the language used in the document might be ambiguous. This ambiguity might cause you or your children to lose their property or pay exorbitant tax rates. To eradicate the likelihood of ambiguity in the legal language, you will need to hire a person with qualifications in the legal background to prepare your estate planning document.

Lack of Contingency Measures

Preparing an estate plan is not a natural process, especially if you do not have a legal background that can help you to predetermine future problems. People end up preparing an erroneous plan that has ‘holes’ all over it. For example, when writing your will without the guidance of an expert, you may fail to write clauses which guide the execution if your children predecease you. Other unforeseen circumstances such as divorce and the birth of new children may occur which further complicates the implementation of your document.

Failing to Update Your Document

Although addressing contingencies might be seen as a way of updating your legal document, other important factors need to be updated. An ordinary person may fail to understand why a change in their bank account should be updated in their will. There are other situations where you can acquire more assets, and you assume that everything has been covered in your will. Attorneys help you to understand the terms and conditions of a valid will, part of which includes updating the will whenever there are changes in your life and properties you own. Doing this yourself could lead to loopholes where some assets, such as liquid cash in the bank, are not allocated to any person.

Lack of a ‘Third Party’ Member

There are many court disputes out there concerning estate plans. Children are fighting one another in trying to take more of the property by justifying using phrases like, ‘I was the one caring for our mother.’ Moreover, there are instances where there is more than one will, or the parent is coerced by a child to favor him or her. Using an attorney is an essential strategy because he or she will act as a third party in the courtroom and will eradicate the chances of hearsay or coercion of a parent.

Blank Spaces

Do-it-yourself wills may accidentally have blank spaces where the owner of the property has not indicated the ultimate beneficiary of the estate. This creates an opening to unethical individuals who might fill in their names, unknown to or against the will of the deceased. Moreover, the court may decide that the closest relative in law has the right to inherit the property, which might not have been the intent of the deceased. A legal expert helps you to avoid such scenarios by filling the document thoroughly.

Procedural Deficiencies

Although writing your estate plan may save money and time in the short-term, it may cost you more in the long run if you fail to follow the due legal process. This means that you may not have the necessary attachment documents and the signature of your witnesses. This may render your plan null and void in most of the United States. A legal expert will solve this problem by ensuring the required procedures have been followed, and all the necessary support documents are available.

Lack of Knowledge When Law Changes

From time to time, the rules and regulations that govern wills and estate planning are changed. For you to prepare a comprehensive document that is considered legitimate under the court, your plan must be consistent with current laws governing estate planning. Lack of knowledge could lead to the formulation of a void document. Consulting experts is necessary because they are updated on legal issues.

Document Revocation

Estate planning rules and regulations require that you give your will to a custodian so that he or she will produce it upon death. However, doing it yourself could lead to a situation where you die while still in possession of the will. The court assumes that such document does not exist and thereby the document is revoked. To avoid revocation of your estate plan, it is essential to consult an attorney who will help in preparation and will act as the custodian of the original copy.

Same-Sex Couples and Cohabiting Partners

Same-sex couples and cohabiting partners have limited rights when it comes to the properties of the deceased. You may not be able to prepare an estate plan if you are in this situation. Consult a legal practitioner for guidance in such scenarios. A proper and comprehensive will needs to be formulated for same-sex couples and cohabiting partners to access the properties of the deceased.

It may seem expensive to seek the services of an attorney when drafting an estate plan, but it will cost much more if you decide to write a will without consulting an expert. People have lost their assets while others have left their families in court disputes just because they wanted to save a few bucks.

Protect your assets and your finances. Talk to a qualified attourney about what to do to set you on the path to financial security.

References:

Money.usnews.com | The Dangers of DIY Estate Planning

Wsj.com | DIY Estate Planning Has Its Risks

Aanestadlaw.com | The Pitfalls Of “Do-It-Yourself” Estate Planning

Practicalplanning.com |  7 OVERLOOKED RISKS OF A DIY WILL

Forbes.com | The Case Against Do-It-Yourself Wills