If you establish a revocable living trust, the first step will be to fund the trust. When you do this, you are transferring ownership of the property to the trust. You act as the trustee, so you maintain complete control of the assets every step of the way.
Your trust can hold your home and other property, even if there are mortgages. Stocks, bonds, and bank accounts can be in the trust. Even small business interests can be in the trust. Intellectual property, collectibles, and commodities can also be conveyed into the trust.
Newly Acquired Property
After you initially fund the trust during the creation phase, you may acquire additional property over the years. One of the advantages of a living trust is the flexibility. You can easily add property to the trust at any time, and you should make an effort to do so.
The Probate Process
Another benefit is the fact that the distributions of the assets to the beneficiaries are not subject to probate. This is a legal process that would be necessary if you use a will as your asset transfer vehicle.
Probate comes with some drawbacks, and one of them is time consumption. Depending on the jurisdiction, it will take somewhere in the vicinity of eight months at a minimum.
The inheritors receive nothing while the estate is being probated by the court. In addition, the inheritances are reduced by probate expenses. Another major pitfall is the loss of privacy. The probate process is public so anyone with an interest can access probate records.
Failure to Transfer Assets to the Trust
Transfers of property in your direct personal possession at the time of your passing would be subject to probate. As a result, you defeat the purpose when you fail to convey assets to the trust.
Another negative is the possibility of an adult guardianship. You can name a disability trustee to manage the trust in the event of your incapacity. However, the disability trustee would have no power over the assets that are not in the trust.
As a result, the state would be petitioned to appoint a guardian to manage outside assets.
Minors
There is also the matter of a minor beneficiary. The successor trustee that you name in the trust declaration would manage assets for a child beneficiary. Again, the court would be forced to appoint a guardian to account for property that is not held by the trust.
Pour-Over Will
You can prevent all these hassles if you take a simple step when you are developing your estate plan. A pour-over will is a document you can use to arrange for the transfer of personally held assets into the trust after your death.
The probate court would be involved, but the process is simple, straightforward, and predictable.
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