A living trust is a powerful estate planning device, as it not only allows property to avoid probate, but it also provides a way to handle your property should you no longer be able to do soon your own. To review how a living trust works:
- A person, called a Trustor, has trust documents drafted to create a living trust;
- Property is transferred to the ownership of the Trust, and a Trustee, often the Trustor until they become incapacitated or pass away, manages the trust property for the benefit of named Beneficiaries;
- A successor Trustee then takes over to handle the property owned by the Trust, and they manage or distribute the property for the Beneficiaries.
But there is a problem, particularly when it comes to online trust kits or do-it-yourself trust kits – many Trustors fail to fund the trust. In other words, they do not transfer the ownership of the property, so they are still the legal owners. Therefore, the property does not avoid probate and the trust offers no benefit.
For property such as bank accounts, stocks and bonds and real estate, you will need to transfer or change ownership of the property by taking them out of the Trustor’s name and putting them into the name of the trust. For example: Jane Doe would no longer be the owner of a residence, but the owner would be listed as “Jane Doe, Trustee, or her successor in trust, under the Jane Doe Living Trust, dated January 1, 2011.” Of course, the actual wording and method of transfer will vary according to the property itself.
For assets such as personal property that does not have a legal ownership title, such as antiques or jewelry, it would be transferred into a Revocable Living Trust by assigning ownership rights from the individual’s name into the name of the trust.
Working with a trust attorney not only ensures that your trust is legal, valid and properly structured, but that it meets your specific needs.