How Is A Trust Properly Funded?
That depends on what kind of assets we’re talking about. For example, if we’re talking about a home then we need to record a deed once the trust is created, moving it from the individual’s name or the couple’s name into the trust. They would then be the trustees of the trust. This is a part of the process that I handle for my clients because the home is probably one of the biggest assets that most people own and we want to make sure it gets in there properly. I also like to hold people’s hands in terms of how to move their bank account. There’s a document that is called a Certificate of Trust. All you have to do is take that Certificate of Trust to the bank so that they have a copy on file and they will change the name on the account.
You typically don’t lose any control of the property – it’s still yours from a tax perspective. It’s just technically owned by the trust. Even though it’s not a person, a trust can own property. Once we put everything into it, it’s still your trust, but if you’re unable to manage your own affairs we just assign a new manager to it. When you pass on is usually when we make it unchangeable. It becomes a non-modifiable trust at the point at which you’ve died and nobody else can go in and tinker with what you wanted to have happen. During your lifetime you’ve got ultimate flexibility. You could cancel it, add to it, or take things out of it.
For example, a piece of jewelry or a piece of art, anything that has significant value. Adding those kinds of things is very simple. It’s just a matter of adding it to a list at the end of the trust. There’s a list of everything that it owns and you can refresh and update that list anytime you want.
Will A Trust Avoid Probate?
There are a number of good reasons to create a trust but avoiding probate is probably the number one benefit. Probate can cost anywhere from 3 to 5 percent of the gross value of the estate and that’s likely to be a lot of money, even if the net estate is not that big. It could cost twenty-five thousand dollars to put an average families’ estate through probate by the time you factor in all the expenses and taxes and costs and appraisals. We can just completely avoid that whole process by prefunding everything into the trust. Probate is a safe process but it’s expensive and cumbersome and time-consuming and there’s no privacy whatsoever. For that reason, the trust has become the more moderate and streamlined way to set things up for your family.
How Is A Trust Settled After The Death Of The Creator Of The Trust?
Hopefully, the grantor, the person that created the trust, has kept a good schedule at the back of the trust. That’s the master list of everything that’s owned by the estate. The trust is like a will which includes instructions for where the property should go and how it should be divided. You can have individual items go to individual people – for example, a special piece of jewelry to a specific person or something of that nature – and then after the individual gifts are distributed everything else is sold and divided in terms of percentages among the beneficiaries. This is particularly important if you don’t want to include a certain person because that can make it crystal clear what your wishes were as opposed to just leaving somebody out.
If you don’t do any planning, if you have no will or trust, then the state is ultimately going to decide who gets what and they might not decide according to what you wanted. Half of those estates are going to expenses and half of them are going to people that they wouldn’t have wanted to receive the property. It’s just amazing to me that people of that level of wealth had not been pointed in the right direction.
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