What Is the Living Trust Procedure?
A living trust is a legal document created by a person or couple to describe the means by which they want their estate to be distributed upon their death. They need to be created by parties who are in sound mind and not under duress. It can outline how assets will be divided, minor children will be cared for and whether or not there health care professionals should resuscitate in emergency situations. Those creating a living trust are usually taken through the procedures by an attorney or financial adviser.
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Assets
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The first step is to gather all information regarding all tangible and intangible assets a person or couple has. This includes real property, investment portfolios, bank accounts, antiques or other family items.
Debts
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All debts must be listed as well in order to understand the real liquidity needs of an estate. After death, most estates lose their value because debts and taxes must be paid quickly and if there isn't adequate cash, items will be sold for less than fair market value.
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Benficiaries
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Deciding how the assets will be split is the next step whether it be children, grandchildren, charities or friends. Some items will be based on monetary value while others on sentiment.
Last Will & Testament
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The last will and testament will outline how the assets will be disbursed to the beneficiaries. It is part of the larger trust document.
Trust
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The trust names a trustee of the estate as well as the conditions, if any, that beneficiaries will need to complete in order to receive their inheritance (i.e. finish school or buy a home).
Life Insurnace
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One of the last components to implement in the creation of a living trust is life insurance. The amount of insurance face value will take into consideration the income needs of the beneficiaries, tax consequences and debts of the estate.
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