Why should you create Trust?
Trust is an advanced estate plan with many benefits over last Wills, including avoiding Probate, improving tax efficiency, and seeking easy settlements.
What is the difference between Trust and Last Will?
Trust and Last Wills differ in many aspects.
The Last Will does not require much effort to create and maintain, while Trust, on the other hand, requires much effort to create and maintain.
The Last Will requires court approval for estate distribution, while the Trust can be settled without court supervision.
The Last Will can be effective only after a person (i.e., Testator) dies, while Trust can be in effect as soon as it is created and established.
The Last Will does not offer tax efficiency, while the Trust does offer some tax benefits.
The upfront cost of creating a Last Will is less but can cost more when it goes to court for probate processing. Creating Trust can be costly, but it can save the hassle, time, and cost during settlements.
The Last Will has been in effect for centuries and has an adequate legal framework worldwide to support its implementation, but many countries do not have adequate legal laws for creating Trust.
The Last Will does not require an establishment similar to a Trust. The main effort in creating a Trust includes the effort required to establish by transferring assets.
The Last Will does not require a transfer of ownership. However, in the case of a Trust, you transfer the assets to the Trust but still maintain control over it. So, your legal ownership of assets transfers to the Trust without losing control. You can change the terms in the revocable Trust anytime. You can remove or add assets anytime as a Trustee. You can also change the type of Trust anytime, for example, revocable to irrevocable or individual to family and vice-versa.
Revoking Trust is not easy, but the Last Will can be revoked by shredding off, and it does not require any effort, while Trust requires effort in revoking as much as effort it requires creating and establishing.
How can you create Trust?
Creating Trust requires many specific steps, and we will provide a summary.
STEP 1: Assess whether you require Trust or not. Assess whether it may give you Tax benefits because it may not always be practical and effective in creating Trust.
STEP 2: Create a list of assets you want to include as part of the Trust and those you prefer to keep outside of the Trust.
STEP 3: Decide who can be your Trustee(s). If you are married, your spouse and adult children can become your Trustee(s).
STEP 4: Decide how you create Trust, whether using online services or an Attorney or Lawyer. Prepare the list of questions you may have before consulting the Attorney so that you can have meaningful conversations.
STEP 5: Choose the Trust type that suits you based on your assets' size, types, and locations. There are various kinds of Trust; some have benefits based on whether your goal is personal or business.
STEP 6: Create the Trust agreement with online services or Attorney, whatever you decide. If you use an online service, ensure you follow all instructions provided because that's your only administrative control over creating the estate plan. Please do not be shy to ask questions before using their service. The same is true when using an Attorney because your feedback is essential to creating an effective Trust agreement. Proper witnessing and signing procedure is crucial for a Trust agreement to be legally compliant. In the absence of court, you may overlook and miss anything in drafting that can hurt later. However, revocable Trusts can be amended if there are any discrepancies, but creating the best from the start is an ideal path to follow.
STEP 7: Establishing Trust is essential and mandatory if you have created Trust that becomes effective. Not establishing Trust equals nothing because it will neither add value nor impact anything. Establishing a Trust means transferring all assets, including investments, to the name of the Trust. This is one of the painful areas why people are getting away with creating Trust, but it has many short and long-term benefits.
STEP 8: After proper establishment, the duty is not over; the maintenance of the Trust is ongoing work. You need to keep track of all assets, income, expenses, profits, losses, and balances to ensure you meet tax compliance. Income tax filing is a requirement for Trust.
STEP 9: Create a Pour-Over Will to cover assets that are not part of the Trust and protect those that can be left out for many reasons.
STEP 10: Secure Trust and Pour Over Will agreements from fire, flood, and theft.