Create a Living Trust in Alabama
Create a Living Trust in Alabama
An Alabama living trust changes the ownership of your property during your lifetime. As part of your estate planning, you transfer property to the trust which then owns it until your death, when it is distributed to the people you choose. A living trust is popular because they are an alternative to probate.
Living Trust in Alabama
The person creating a living trust in Alabama is the settlor. A trustee is named who manages the trust and has the responsibility for distributing the property according to the trust. The settlor can name himself as trustee, but should also appoint a successor trustee who will manage the trust after the settlor’s death. The property is held by the trust for the beneficiaries (people who will receive it). Anyone, including the trustee, can be a beneficiary. The trustee eventually distributes the property in the trust to the beneficiaries. This can happen during the trustee’s life or after his death, depending on the provisions of the trust. A revocable living trust can be changed or undone by the settlor at any point during his life, unless the trust is specifically designed to be an irrevocable living trust.
Alabama living trusts differ from other states in that a trust can be named as the beneficiary of an insurance policy, so the proceeds of the insurance can be paid directly into the trust and then distributed via the trust. If you do not limit the length of the trust, Alabama law limits it by statute.
Do I Need a Living Trust in Alabama?
A living trust is never required, but it can often be a good idea to create a living trust in Alabama. If you do not have a living trust, your property passes through your will. If you have no will, it passes via the Alabama intestacy laws. When you create a living trust in Alabama, you pass your property outside of probate. This means there is no court process and no public record of what is in your trust or who you are giving it to, which can provide you and your beneficiaries with privacy. Assets in a trust pass immediately when they are to be distributed, unlike probate which can take many months. Another advantage of a living trust is that you can control how and when your assets are distributed to your beneficiaries, so you can give assets at particular ages or events. When property passes through probate it is all passed to the beneficiaries immediately.
A living trust allows your assets to be managed for the rest of your life, so if you become incapacitated, everything is already in the trust and is managed from there, which may reduce or eliminate the need for powers of attorney documents.
A living trust has another benefit in Alabama. Because Alabama does not adhere to the Uniform Probate Code, its laws are more complex. A living trust allows you to circumvent those laws and procedures and distribute your assets as you see fit without any government involvement. By avoiding probate, you also save on legal fees and court costs.
Living Trusts and Estate Taxes in Alabama
There is no state estate tax in Alabama, but property placed in a living trust in Alabama may be exempt from federal estate taxes. This depends on the type of trust that is created. Basic trusts do not avoid estate tax. An AB trust, also called a marital trust or QTIP trust, passes property first from one spouse to the surviving spouse, then to that spouse’s beneficiaries, transferring along the first spouse’s tax exemption. AB trusts are rarely needed now though since federal law exempts more than $5 million per person. Note that placing your assets in a living trust does not shelter them from Medicaid eligibility laws.
How to Create a Living Trust in Alabama
To create your own living trust in Alabama, you need to first create or have the trust document created for you. It must include the name of the trustee and list your beneficiary or beneficiaries. This legal document must then be signed by the settlor in front of a notary public who will notarize the signature. Once the trust is set up, property should be transferred into the trust (called “funding” the trust). This is done by changing the ownership of the items (such as on a property deed or a bank account name) to the trustee of the trust. You can begin a trust with a small amount of money and add to it if you wish, or you can create the trust and have it become funded upon your death.
Living trusts are an appealing way to manage your assets and plan for the future. This simple document can provide great peace of mind.
Create an Alabama living trust online quickly and easily with LegalZoom. Start by answering a few questions; LegalZoom will review your answers and you'll receive your complete living trust package by mail.