Does A Trust Always Have Assets In It?
A trust should always have the assets in it that you want to protect. If you want to protect the assets from probate, they must be taken out of your name and placed into the name of the trust in order to have that probate protection. If you want to have asset protection, you should keep in mind that the trust can only protect the assets that it actually owns. Any assets that you haven’t titled into the name of the trust are subject to your taxes, creditors, long-term care and the like. It is possible to have an empty trust; it’s just not wise or useful.
What Happens Upon The Death Of The Trustor?
This would be very much like what would happen if the president of General Motors Corporation passed away. Some other person would be appointed to assume the duties of the president of General Motors, and that person would continue to operate the General Motors Corporation following the rules of the corporation. Similarly, a new trustee will step in and take control of your trust and follow the rules of your trust to manage your financial affairs as you have directed during your lifetime.
Why Do You Recommend A Trust As An Effective Estate Planning Strategy?
A trust offers many more advantages than do last wills and testaments. For example, a trust can provide asset protection for your estate. If you are required to spend your final years in long-term care, the assets that belong to the asset protection trust may be fully protected from that long-term care expense, and yet your trustees may still have the right to use those assets to reduce the misery in your life and increase your opportunities to get out of the long-term care facility and see the world. Trusts also offer probate avoidance.
Probate is a great expense to many estates. Sometimes up to 20% of an estate will be lost to probate expenses; but if those same assets were owned by the trust, probate could be avoided completely. The trust can also provide guardianship avoidance. If you have provided in advance someone to manage your assets, then it would not be necessary, generally speaking, for the trustee to seek guidance from the court as to what should be done with your assets. They can step up as trustee, take the actions that you have described in your trust and take care of your financial affairs.
Is A Will Just As Effective As A Trust?
A will is a very different creature than a trust. A will can be compared to a set of assembly instructions. For example, if you’re assembling a bicycle, you’ll find that it comes in a small box, much too small to hold a bicycle. Of course, it also comes with several pages of written instructions as to how to create a bicycle from these parts. A will is similar. It does not do anything on its own, but it is a set of instructions to the probate court that gives guidance to the court as to what the owner of the assets desired the court to do with his or her property.
Therefore, the will has to be subject to the probate court in order to become effective. That is expensive and can be very time-consuming, far more expensive and far more time-consuming than a trust administration. The trust typically costs more upfront to create and saves a great deal more in the long run. One might reasonably say that a will is better than nothing because it provides instructions, but it is not as good as a trust because it does require probate.
How Does A Revocable Living Trust Avoid Probate?
As a legal matter, the trust is an entity, like a corporation, which will, when properly funded or integrated, own the property that you desire the trust to control. Therefore, when you pass away, the new trustee steps in and takes authority as granted by your trust document and transfers ownership to your beneficiary or provides care for your beneficiary just as you have stated in the trust. Because the asset is owned by the trust, there is no need to have the court appoint someone else to manage the asset, and you have already decided in your trust document who your successor trustees will be, and your decisions will be ultimately carried out.
On the other hand, probate is required when you own assets in your own name. When you pass away, the assets that are held in your name are subjected to probate because you are not there to execute the transfers, pay the bills and wrap up the final financial affairs of the estate. A probate court is necessary in such an instance.
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