How to Plan a Living Trust
Planning for a living trust involves thinking through all the required elements for a legal trust, including naming a trustee and a beneficiary, identifying property for the trust, and creating a written trust document. Additionally, planning for a trust involves emotional and financial considerations, such as what family members or loved ones to include as beneficiaries, how much property you own and whether you need to be concerned with estate taxes.
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Instructions
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Estimate the total value of all of your assets. If you own more than $1.5 million in total assets then you should consider consulting with an estate planner or tax attorney to see how you can minimize federal estate and state inheritance taxes.
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Identify a trusted person or business who can act as the trustee of your property. Many people name themselves as trustee, while others name an attorney or bank.
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Identify the individuals you want to receive income or property from the trust. Keep in mind that as the trust creator, you can control how much and when each beneficiary will receive from the trust.
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Decide whether you want the trust to be revocable or irrevocable. Generally you should only use an irrevocable trust if you want to use the trust as a way to minimize your income taxes.
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Identify how the living trust will coordinate with your will. A living trust should always work together with a will; a living trust is never a complete replacement for a will.
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Tips & Warnings
Consider consulting with an estate planner or tax attorney even if your net worth is less than $1.5 million. Most attorneys will provide an estate plan for around $1,000, and although that might seem like a lot of money, a properly prepared estate plan can save a significant amount of heartache and money after you die.
Living trusts are legal relationships that exist under state law. This means the details of how to create a trust, manage a trust, and terminate a trust can vary from one state to another. You should never create a living trust without at least a basic understanding of your state's laws on living trusts.
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