Setting up a family trust is one of the most common types of estate planning methods. Also known as a living trust, this method involves transferring ownership of personal belongings and financial assets so property does not have to go through probate for settlement procedures.
While it isn’t difficult to arrange a family trust, most people find the process somewhat daunting. They are uncertain about terminology and legalese and sometimes fail to properly fund the trust which can result in major problems at the time of death.
The simplest way to setup trusts is to work with estate attorneys. These lawyers have endured years of specialized training to help people protect estate assets and reduce inheritance and estate taxes.
One of the most common reasons people establish family trusts is so their estate will not have to endure the probate process. Probate is mandatory for estate settlement. However, there is a variety of strategies that can be used to transfer ownership of assets and avoid probate altogether.
When ownership of property is transferred to trusts the items no longer belong to the individual. Instead, they are owned by the trust. Individuals must take steps to have property titles, bank accounts, and financial investments transferred to the trust. This isn’t difficult, but does require account holders to file appropriate paperwork to complete the process.
Married couples tend to prefer living trusts over most others. Living trusts allow both people to keep control of their assets separately and together. Furthermore, each individual can serve as the Trustee. With that said, individuals will need to designate another person to act as the Trustee in the event that both spouses pass away.
Individuals who inherit estate assets safeguarded in trusts are called beneficiaries. For the most part, beneficiaries are the surviving spouse, children, and close relatives or friends. Any time children under age 18 are involved, a child trust fund can be setup to protect assets until adulthood.
Family trusts provide a host of advantages to all relevant parties. Trusts are more ironclad that a will and testament and keep assets out of probate. Trusts can also name a successor Trustee to take control of personal finances the event the person setting up the trust become incapacitated.
This is a huge benefit because it eliminates the need for relatives to go to court and receive permission to handle private affairs. Trusts also eliminate the need for family members to hire a lawyer to seek guardianship rights.
Living trusts can also include power of attorney forms to cover medical and personal finances. Medical POA does not grant Trustees’ permission to make medical decisions for another person unless a physician has supplied written documentation declaring incompetency.
At Craton and Switzer we have a dedicated team of estate planning lawyers that work with clients to help them find the best strategies to protect estate assets. We invite you to contact us to talk about setting up a family trust or visit our estate planning blog to learn more about available options.