This is my third installment in the saga of my client whose husband passed away too early in life. She had a heck of a time getting his affairs in order after he passed. If you recall, he had done a will online without an attorney, which caused a headache at the probate court, even though he checked in on his accounts to make sure they would go to his wife. Reminder: assets don’t automatically pass to your spouse or your kids!
As I said in the last email, for an asset/account to avoid probate, it needs to have someone else’s name attached to it, such as a joint owner, a beneficiary, or a trust. So today let’s talk about trusts.
What is a trust?
Many people think trusts are only for the rich, but that’s not true. There are many different types of trusts, and they serve different purposes. A trust is its own legal entity, like an LLC or a corporation. As with an LLC or corporation, you can put assets (accounts) into trust, and you can take them out.
There are three components to a trust.
Trusts, like a Will, say who is in charge and who gets the assets when you pass away. However, the Will gets filed at the Probate court, the Trust does not. And the Will ONLY comes into play when you have passed away, while a trust is a working entity while you are alive AND it continues on after you pass away. So, for a basic living revocable trust (living trust is a trust that is established while you are alive, revocable means you can make changes to it at any time) you can be the grantor, the trustee, AND the beneficiary. It will have a clause in the document naming the successor trustee and successor beneficiaries.
The caveat is that you must fund the trust while you are alive to protect the assets from probate. Funding a trust means to put assets into it. For life insurance policies and investment accounts, you can simply make the trust the beneficiary. Then when you pass away, the policy or the investment account will be paid to the trust. Instead of the investment account having just the beneficiaries name on it, it will say “First Name, Last Name, trustee of the revocable trust, dated 12/13/2022.”
Transfer on Death
In my previous email I talked about using a Transfer on Death (TOD) for checking and savings, but this could be problematic if you are concerned about minor children getting the cash outright without any oversight. Depending on the bank, you could possibly do a TOD to the trust. In our experience, small local banks will do this, but the big national ones will not. Therefore, you will have to weigh the pros and cons of moving a checking/savings account to trust or doing a TOD with the knowledge that they will have access outright at 18.
Regarding a home, you can’t name a beneficiary on a piece of real estate. And people buy and sell real estate at all stages of life, so you don’t always want to put someone else’s name on the deed. Furthermore, there could be negative tax consequences of doing that (which is a whole other blog or webinar…).
Nine times out of ten, we put our clients’ homes into trust. How? We retitle the deed from the owner to the “Owner, as trustee of the trust, dated…”. Once we record this at the registry of deeds, that places your home into trust.
Now there are many other details that go along with all of this, but the purpose of what we do is to set our clients up to have an easy transition of their assets.
My client came to me out of necessity. But not everyone wants (or should!) wait until something tragic happens. We should be getting our estate done at the time of a major life change like buying a home, getting married, having a baby, getting a divorce, the list goes on!
Because we feel so strongly about setting our clients up for success, we developed a program to help people get over the hurdle of getting their estate plan crossed off their list. In the next couple of days, we will be relaunching our Wills in a Week program. So please keep an eye out for how we’ve made it easier and a little cheaper to take the first step in protecting their family. Remember, it’s not about you, it’s about your family!
Don’t have an estate planning attorney? Contact us today to make sure you know that your assets will be passed down according to your wishes! Ladimer Law can be reached at email@example.com or at 508.532.8689.
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Ladimer Law specializes in estate planning. We protect our clients, their heirs, and their assets by listening closely, knowing the law, and executing estate plans that fit and evolve.