What Is A Trust?
A trust is a financial relationship between three or more people. The trustor has an asset that they wish to give to the benefactor(s) after they die, so they employ the help of a trustee. The trustee becomes the guardian of the asset until such a time as it can be passed to the beneficiary. One of the most common versions of this is a living trust.
What Is A Living Trust
A living trust is just one type of trust. Other types include special needs trusts or joint trusts. In a living trust, the trustor sets up what assets the beneficiary will receive in the event of their death. A typical example of this is when an older person wishes to leave an inheritance to their grandchild. If the grandchild is not or will not be of adult age at the time of the trustor’s passing, they may use the family lawyer or the child’s parent as a trustee. Living trusts can also assign assets to adults to speed up the succession process or avoid taxes on the assets.
Trust Vs. Will
A trust and a will are two similar documents, but they can behave in very different ways. For instance, they are both beneficial for designating where your property will go after you die, but a will would also be used to transfer guardianship of your minor children. Furthermore, a will is a document that deals with inheritance in a broader way. A will can include language that indicates everything you own should be left to your children, whereas a trust will have very specific assets listed as an inheritance. If you acquire more assets after the trust is designated but never update the trust, the will shall ensure that the additional property gets to the right places.
Benefits Of A Trust
Trusts Avoid Probate Court
Probate is a process by which your assets are verified and distributed according to your will. This is a public court process. That means all of your assets and your beneficiaries’ inheritance are made public record. Avoiding probate can speed up the process and keep these elements private. When you or a loved one dies, privacy and a seamless transfer of assets can be a great comfort.
Trusts Offer Specific Parameters
With a trust, you can customize your estate plan however you see fit. You can add an age contingency or even parameters on how your assets should be managed or spent. For example, you might set a clause that says your grandchildren should only start receiving money once they have reached the age of 18, and even then, the funds should only be used for college. Likewise, you may decide that a beneficiary with poor money management skills should be put on a monthly allowance instead of receiving one lump sum.
Does My Estate Need A Trust?
Setting up a trust in addition to your will can save for family time, hassle, and court fees. Probate courts often must hire financial experts to assess the value of your business or property after you die. Any outstanding debts are also paid off through this process before your beneficiaries can receive their inheritance. All of this can be avoided by establishing a trust. Alternatively, Mississippi offers a streamlined process for estates totaling less than $50,000. If your estate is valued at less than $50,000, or the real estate you are transferring is worth less than $10,000, likely the probate process will be quick and easy. Thus, a trust may not be necessary to avoid probate.
How Do I Set Up A Trust?
- List Your Assets: Start by making a list of everything you own. First, list tangible things like cars, boats, houses, and jewelry. Next, list the intangible things like bank accounts, retirement plans, life insurance policies, stocks, and bonds.
- List Your Beneficiaries: Family, friends, or even charitable organizations can be listed as your beneficiaries. Consider each of their specific needs and what you’d like to pass on to them.
- Name Your Trustee: Technically, you will name yourself as trustee while you are still alive. But you must appoint a successor trustee to handle things after you die. This can be a loved one, a bank, or a trust company.
- Fill Out the Trust Document: This is called a declaration of trust, and it’s where you will put all the information above that you have compiled.
- Transfer Property to the Trust: This involves going through the titles and deeds that you compiled earlier and changing the ownership from “John Smith” to “John Smith’s Living Trust.” This can be a complicated step, but hiring an attorney can ensure nothing is missed.
Do you have questions about setting up a living trust? Call The Law Offices of Rusty Williard at (601) 824-9797.