What Are Some Components That Make A Strong And Effective Trust?
When a lawyer creates a trust, they have an obligation to consider the worst situations that could happen and create contingency plans. What if the client dies while their child is a minor? What if their child is an adult but doesn’t have full capacity due to some type of disability? The lawyer should attempt to address those kinds of contingencies.
It’s also important to choose the right trustee for the trust. If you die or become incapacitated, who could you pass this football to (if you will) to move it down the field?
There are other important questions to ask during the planning stage. What assets do I have to put into this trust? Will those assets be around in five, 15, or 20 years? Do I have more than what I am thinking about?
It’s important to do some research and ask questions. I would now refer you to my website to look at some frequently asked questions regarding wills and other things that you should look at to make sure that you are creating a proper document that will cover you in the future for whatever the situation may be.
Do I Lose Control Over My Assets If I Put Them Into A Trust?
No, you don’t lose control over your assets. In a revocable trust, you always have control and can make changes any time you want; you can reword it so that only you have the asset or you can put something into the name of the trust. In an irrevocable trust, you also don’t lose control of the assets, but you do lose control over disposition of the assets in the event that you want to change it (in which case, you’d have to go to court). With both types of trusts, you never lose control over how you manage those assets during the course of your life.
Can I Change The Terms Of My Trust?
For a revocable trust, yes, you can make changes regarding anything and everything. You can only make minor changes for an irrevocable trust, so you would not be able to make a substantial change regarding, for example, the beneficiaries.
Are Assets Held In A Trust Going To Be Protected From Creditors?
The answer is no for a revocable trust and yes for an irrevocable trust. If a person controls the assets, then basically that trust is potentially attackable. Creditors are getting smarter now, and lawyers use that fact as a selling tool for creating trusts, which I think is a bit misleading. A trust that’s revocable means that you or the settlor has control over those assets, and the IRS uses the term control to determine whether or not creditors can attack something. The courts have adopted a similar mindset.
An irrevocable trust is protected from creditors unless they can show that the settlor or the creator has somehow been handling the assets or making changes. The creditor has got to show more than they would for a revocable trust to pierce the protective veil of the trust.
Is A Will Just As Good As A Trust? Should I Have Both?
A lot of people misconstrue wills with trusts. A will is not as good as a trust. A will only guarantees that you will go into probate court, which you want to avoid. Probate is death for your assets, as well as time-consuming and stressful for the people you leave behind. A will is only determined by the judge, and basically, the judge is in probate court. So, you don’t want to have that.
We do have what is called a pour-over will, which is a will that’s created to transfer assets into the living trust as if you’d done it during your lifetime. We don’t normally think about things that we don’t have. For example, you play the lottery, and the day you win the lottery, you die. You didn’t plan for that. If you have a pour-over will, those winnings actually pour-over into the living trust, which avoids the probate process.
A will can also create issues in terms of heirs and who gets what, and you don’t want to have those kinds of fights. A trust is created during your lifetime for the benefit of someone, and therefore, the courts treat it as if you’ve done this and it’s not created upon death, meaning they have no jurisdiction over a trust. A trust is private, and it goes where you want it to go without court action on it.
For more information on Components of a Strong and Effective Trust, a free consultation is your next best step. Get the information and legal answers you are seeking by calling (314) 786-3536 today.
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