Estate Planning 101: Five Essential Steps in Creating a Living Trust

It is never too early to start planning out what you want to happen when you pass away. In general, the earlier you start planning, the easier it will be. One estate planning tool that is helpful for many people is known as a “Living Trust.” In this blog entry, we look at five important steps in the process of creating a living trust. We’re proud to be a source of information for those looking into estate planning and trusts. We’ve written about trusts in the past, don’t fall for common myths!

Step 1 – Identify Your Goals

Take some time to identify what your goals are for making this document. Since each individual has their own specific circumstances, they will want their living trust to reflect their own wants and needs. When considering your goals, make sure to think about if/how you want to control your assets after your death, whether you wish to provide the benefits of asset protection to your beneficiaries, your finances, attempts at probate avoidance, and planning for the possibility that you may become incapacitated.

Step 2 – Who is Involved

When it comes right down to it, your living trust is as much about your loved ones as it is about yourself. You need to decide who your trustee or trustees will be, and also who the beneficiaries will be. In many cases, choosing who will get your assets is fairly simple, but finding someone you trust enough to execute your wishes may be more difficult.

Step 3 – Drafting the Document

Once your wishes, needs, and circumstances are fully understood, drafting your living trust is a fairly straightforward process. The living trust document should be drafted by an experienced estate planning attorney who is familiar with the current status of the law. He or she will often spot challenges or opportunities that are not always apparent at first. A good attorney will be able to lend a dose of practical advice from experience so as to help make for a smooth transition upon your death or incapacity.

Step 4 – Funding Your Trust

Decisions about when to fund, or re-title, assets into your living trust should be made in conjunction with an experienced estate planning attorney. Likewise, decisions about what assets to fund are very important. While a fully funded living trust is often the goal when it comes to probate avoidance, the funding of certain assets into a living trust could result in the loss of substantial asset protection benefits and create undue difficulties for your loved ones some day.

Step 5 – Maintain Your Trust

A living trust is not something you should just complete and then forget about. Over time, you may gain additional assets or choose to modify your beneficiaries or decision-makers in the trust agreement. Similarly, a change in beneficiary circumstances may lead to a different approach in terms of how an inheritance is someday distributed. Ideally, you should review your trust and make any necessary changes at least once every 3 years, or whenever there is a major life change.

Creating and maintaining a living trust is an important responsibility. Give us a call today if you’d like to learn more!