How to Prepare a Living Trust at Home

A living trust will designate who handles your estate.

A trust essentially transfers title of your assets to a trustee, who is then legally obligated to manage the trust assets for the benefit of your beneficiaries. A living trust is a special type of trust that is an effective means of avoiding probate or transferring management of your assets in the event of your incapacitation. When you understand the unique attributes of living trusts and how they can help you, you will have the knowledge you need to create a living trust at home.

Instructions

1. Obtain a living trust form or software. Generally, the more expensive the software is, the more complete the information and estate-planning tools it will provide. Be aware, however, that the only form a basic living trust requires is the living trust itself, although other estate-planning tools may complement your trust. However you obtain the form or software, make sure it is tailored to the state you live in, because probate is governed by state law.

2. Create a trust that is either jointly held with your spouse or separate from your spouse. Stepchildren do not have automatic rights to property, because they are not blood relatives. Couples who married later in life may benefit from separate living trusts to ensure that each spouse's assets goes to his or her beneficiaries, regardless of which spouse dies first. A trust can even be written to benefit the surviving spouse, followed by the deceased beneficiaries once that spouse passes. (See reference 1)

3. Name yourself (or yourself and your spouse) the trustee of your living trust. Although you maintain control of your property regardless of whom you name as trustee, naming yourself makes several steps easier. First, you can fund the trust without the aid of anyone else. Second, you don't have to change the trust document in the event that the trustee cannot remain in his role for any reason.

4. Name a successor trustee. The successor trustee is the person who will act as trustee after you (and your spouse for a marital trust) die or become incapacitated. This will be the person responsible for distributing your assets to your beneficiaries after your death, or, in the event of your incapacitation, managing your assets for your benefit.

5. Declare the assets you are placing within the trust. Any personal property can be placed within the trust at the time of its creation. This property can either be included within the text of the trust or, more commonly, in a schedule that is referenced within the trust. (See reference 2, page 2.)

6. Place your existing property within the trust. Transfer deeds and titles to the trustee's name, "Jane E. Doe, Trustee of the Jane E. Doe Trust." Sign transactions with "Jane E. Doe, Trustee." (See reference 2, page 2.)

7. Add future purchases to the trust. For items that do not require title, add them to the schedule that lists assets. For real estate or vehicles, put the deed or title in the trust's name. Don't forget to sign the transaction as the trustee.

Tips & Warnings

• Contact the mortgage and insurance companies associated with your assets to see if there are any negative repercussions to transferring title to your living trust. (See reference 2, page 6)

• Use a pour-over will that transfers remaining assets to your trust upon your death. These assets will still go through probate, but your pour-over will will provide the means for the court to act and your trustee to administer the entire estate.

• If your trustee is also your beneficiary, choose someone you can rely on to spend her inheritance for your continuing care should you become incapacitated.

• Transferring your home to a living trust may trigger a property tax reevaluation.

• Your living trust will not protect your assets from creditors or divorce. (See reference 2, page 20.)

• If you get a divorce, your state's law may not automatically remove your ex-spouse from your living trust. (See reference 2, page 7.)

• A living trust will not reduce your tax liability. (See reference 2, page 20.)

References

• Save Wealth Estates: Living Trusts
• American Bar Association: Living Trusts

Resources

• American Bar Association: Living Trusts