Do you know what happens to your wealth when you die? If you don’t plan for the inevitable, your family could end up with nothing. That’s why you should consider creating a living trust.
What is a living trust? Great question. Basically, it’s a tool used to plan how to transfer your personal wealth in a clear and easy manner.
This article takes a look at the steps for setting up a living trust. Keep reading to discover insight into how to make the process as simple as possible.
1. Set Clear Reasons for Creating a Trust
A living trust has advantages and disadvantages. That’s why it’s important to clearly understand your motivation for creating one.
After all, it can be a complicated process. There are a ton of details involved, including the need to meet with attorneys, banks, and insurance companies. You’ll also have to redeem, retitle or transfer the ownership of certain assets.
2. Decide Who Should Fill Each Role
The primary roles involved in a living trust include the grantor, beneficiary, and trustee.
The grantor is the individual who owns the assets that are going into the trust. The beneficiary is the individual who will receive the assets, and the trustee is the individual who is assigned responsibility for managing the trust.
3. Identify Your Primary Assets
Next, you’ll need to identify the appropriate assets to be listed in the living trust. These should include specific assets that you’d like to keep in the family for many years and things that could cause conflict when you’re gone.
4. Educate Yourself About the Tax Implications
There are also plenty of tax implications to consider. This includes state and federal taxes that will impact assets placed in the trust. Keep in mind that your beneficiary will likely face an inheritance tax, thus it’s crucial to plan accordingly.
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5. Be Sure to Include an Incapacity Clause
In some cases, the trustor and trustee named in the paperwork will be the same person. In these situations, it becomes necessary to name a successor trustee. This is what’s known as an incapacity clause, which grants directorship to the successor trustee in the event of serious illness or mental incapacity.
6. Be Sure to Take Advantage of FDIC Protection
One of the great things about the FDIC is that it provides the same protection for trusts as it does for bank accounts.
You should definitely plan to discuss this federal benefit with your attorney or accountant in order to better understand the exact details.
7. Consult with an Expert
You’ll need to hire a good law firm with plenty of experience with living trusts. This will help you properly navigate this precarious process with the level of expert knowledge needed to get everything done right.
A Guide for Setting Up a Living Trust
Planning for the future can seem overwhelming sometimes. Fortunately, this simple guide for setting up a living trust can help reduce your anxiety.
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