Determining if you need an attorney to create a trust is the first question to ask yourself in this process.
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by Brette Sember, J.D.
Brette is a former attorney and has been a writer and editor for more than 25 years. She is the author of more than 4...
Updated on: April 10, 2024 · 11 min read
You’ve spent your entire life building your wealth, acquiring assets, and securing your family’s future. But have you thought about what will happen to all you’ve worked for after you're deceased? This is where a living trust comes into play.
A living trust is a legal arrangement that offers several advantages:
A living trust attorney can be helpful when you are thinking of setting up a trust. They specialize in the creation and management of living trusts, offering assistance in the proper preparation and funding of the trust. While establishing a DIY living trust possible, an attorney’s guidance can ensure the trust documents its proper setup, and mitigate potential legal complications.
Engaging a living trust attorney is about more than creating a legal document. It ensures that your assets are properly protected and that your wishes are carried out even after you’re gone. A trust attorney can create a legally sound document that aligns with your directives and state laws.
If you feel that you have complex estate planning needs, will be passing on a lot of assets to your family, have special needs beneficiaries, or have a large amount of life insurance, you should consider hiring an attorney.
A crucial aspect of setting up a living trust is choosing a successor trustee. The successor trustee is responsible for managing the trust after your death or incapacitation.
Successor trustees could potentially be your adult children, other relatives, or trusted friends. However, the choice isn’t always limited to individuals; you could also choose a corporate trustee. They bring experience, objectivity, and reliability to the table, often at reasonable fees. When choosing a successor trustee, it is important to select someone who is responsible, financially prudent, and capable of making sound decisions when it comes to managing trust property. Your attorney’s expert advice during this process can assist you in making the most suitable decision for your trust.
Creating a living trust is a critical step in structuring your estate plan and can be as simple or as complex as your estate planning documents themselves. Creating a living trust can be split into three components: cost considerations, including fees involved, trust type selection, and the procedure for trust funding.
The cost of establishing a living trust can vary based complexity of your estate, your geographical location, and legal fees. The typical attorney fees for creating a living trust can range from $1,000 to $3,000. Your choice of trust type can also influence the overall costs. For instance, a revocable living trust may be more complex and could potentially incur higher establishment expenses than an irrevocable trust.
When setting up a trust, one of the key decisions you’ll need to make is whether to opt for a revocable or an irrevocable trust. A revocable trust provides flexibility, allowing changes to be made at any time, with the trustee retaining complete control over the trust assets. However, it doesn’t offer full asset protection and doesn’t provide any tax sheltering.
On the other hand, an irrevocable trust offers enhanced control over asset distribution, allowing specific instructions for how and when assets will be distributed, which is a key benefit. However, a drawback is the inability to alter the trust’s terms once it has been established, limiting any potential modifications.
Once you’ve chosen the type of trust you want to set up, the next step is to fund it. Funding a trust involves transferring your assets, such as real estate, financial accounts, and personal property, into the trust’s name.
The process of transferring these assets into your trust varies based on the type of asset. Here are the steps for transferring different types of assets to create a living trust:
It’s important to remember that your trust only controls the assets that have been transferred into it. Assets that are not transferred into your trust properly can become subject to a probate court even after you die.
Understanding the tax implications of your trust is a critical aspect of estate planning. Here are some key points to keep in mind:
An irrevocable trust, when structured with suitable terms, can assist in avoiding estate tax liability. If your net worth is close to the federal estate tax exemption limit, consulting an estate planning attorney for potential strategies to avoid estate tax liabilities, including strategies to not owe estate taxes, becomes crucial.
Trusts aren’t just for managing your assets; they can also be a powerful tool for protecting your loved ones. Trusts for minor children allow you to protect assets in order to:
Trusts can also offer financial security for other relatives, ensuring that they’re taken care of after your passing. From covering educational expenses to providing a steady source of income, a trust can help ensure your family’s financial stability in your absence.
If you own property or your business interests have assets in multiple states, multi-state trust considerations become crucial. A multi-state trust may be liable for state income taxes in multiple states, depending on whether it meets the criteria for being considered a resident trust in those states.
Navigating the legal frameworks of different states can be challenging, but a living trust attorney can guide you through this process. They can help you with:
Estate planning already poses its own complexities. When multiple states come into play, it is best to seek the advice of an experienced estate attorney or planning attorney.
Estate planning isn’t a one-and-done deal. As your life changes, so should your estate plan. Major life events such as:
These types of life events should trigger a review of your estate plan, including your revocable living trust.
It’s recommended to review your revocable living trust or trusts at least once a year to ensure that it still reflects your wishes and circumstances. If you opt for a revocable trust and find that it no longer fits your needs, you can modify your revocable living trust. The process of modifying a revocable living trust involves:
Unlike a revocable trust, an irrevocable trust is designed not to be changed. But that doesn't mean that you can't modify an irrevocable trust if it no longer meets your needs. Here are some methods you can use to change an irrevocable trust:
If you are concerned about the costs of using an estate planning lawyer to set up your living trust, you can always draft your own trust agreement. However, if you take the DIY route, you need to make sure that the last will and your new living trust meet the following criteria.
Check your state laws for trust requirements. Each state has its own requirements regarding what the trust must include, how it should be signed and witnessed, and whether an attorney is required for the transfer of certain assets into the trust.
Type the document. A handwritten trust document may be valid if it's properly signed and executed, but a typed document will be clear and easy to read and is always best.
Keep it simple. The more basic your trust, the better. Don't include anything beyond the basic information required by the state.
Transfer ownership. Once you complete the document, you must transfer ownership of your assets to the trust for it to take effect. If you skip this step, the trust has no effect at all.
Although creating a living trust yourself is an option, proceeding without professional advice might not be the best option for a complex estate. A professional trust lawyer ensures the validity and proper structure of a living trust document, providing competent representation and advice to their clients. They can help you navigate through various legal complications, emotional distress, and potential financial loss that you might face if you decide to go it alone
When a trustee is unable to continue serving, knowing how to manage the trusteeship transition becomes vital. The process involves:
Potential challenges during the transition of trusteeship may include adapting to change, maintaining a long-term perspective, and ensuring a successful transfer of ownership to the next generation. It’s important to have a plan in place for such scenarios, and working with an attorney can ensure a smooth transition.
Estate planning is a crucial aspect of securing your wealth and protecting your family’s future. Whether it’s choosing between a living trust and a will, selecting the ideal successor trustee, understanding the tax implications, or addressing multi-state trust considerations, each decision plays a key role in how your estate will be managed and distributed after your passing. Remember, it’s not just about making plans; it’s about making the right plans. And with the right guidance from a professional trust and estate lawyer, you can ensure that your legacy is preserved just as you envisioned.
Some of the disadvantages to a living trust include:
A basic living trust with supporting documents in San Jose, CA, typically costs between $2,000 and $3,500 when prepared by a traditional law firm in the area. However, using an online service like LegalZoom can help lower some of those costs.
Creating a living trust in NY can cost more than $1,000 if you use an attorney for assistance, as their fees vary. However, using an online service like LegalZoom can help lower some of those costs.
You should not put certain assets in a trust, such as retirement accounts, health savings accounts, life insurance policies, UTMA or UGMA accounts, and vehicles. These items are typically excluded from a living trust.
A living trust is a crucial part of estate planning, allowing you to maintain control over your assets during your lifetime and ensure they're distributed according to your wishes after your death. It helps you avoid the probate process and provides a level of privacy that a will doesn't offer.
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