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paustin@pennyleeaustin.com
paustin@pennyleeaustin.com
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541-770-6720
541-770-6720
Trust
USE OF A TRUST FOR YOUR ESTATE PLAN SOUTHERN OREGON
A slightly more advanced estate planning device is the use of a trust. An individual or a married couple with modest estates can use a revocable living trust for estate planning purposes. A married couple can typically use a joint trust as their trust document rather than two separate trusts. When a trust is drafted, you are the trustor (the person setting up the trust) you are the trustee (the person in charge of the trust assets), and you are the beneficiary (the person entitled to all benefits of the trust assets). The trust document will state who will be the successor trustee in the event of your death, disability or incapacity and will state who your beneficiaries will be at the time of your death. Once the trust is established, it becomes a new entity in the eyes of the law similar to when a business becomes a corporation. A revocable living trust does not need to file a separate tax return nor obtain a separate tax identification number when established. You would prepare your tax returns as normal.
The key to a trust is in the funding. This means that you actually take majority of your assets and transfer them to the trust. Now the trust owns the assets. For example, if you own real property, a new deed would be prepared transferring the property from your individual name to your name as trustee or trustees of the trust. The deed is recorded with the county and the real property is owned by the trust.
There are several reasons the trust is a useful estate planning device. First, if you become disabled or incompetent, only then can your successor trustee can step in and manage your trust assets for your benefit. You can leave detailed instructions as to how you would like your care to be managed. Second, the use of a funded trust will avoid the probate process. At the time of your death, the property is not owned in your individual name but in the name of the trust. The trust is still in effect and the successor trustee can step in and manage and distribute the property without a need for probate. Remember, probate is only necessary when property is in your individual name at the time of death.
There are certain assets which are not transferred to the trust, such as retirement accounts and life insurance policies. Those types of assets have named beneficiaries which means the property will transfer to the beneficiary at the time of your death and will not be included in your trust estate.
There are also tax consequences to consider in establishing an estate plan. However, they are too complicated to discuss here. In this short article, I have tried to provide you with an outlining guide as to various estate planning processes. If you would like more detailed information or information specifically related to your estate affairs, please feel free to contact me. I would be happy to speak with you and address any questions or concerns which you may have.