You can put just about anything in a family trust, including the kitchen sink, which is part of your home. Family trusts, also called revocable or living trusts, hold the property and assets you want to leave to your family. Family trusts avoid court proceedings known as probate, a costly and timely procedure to legally distribute property after death. You also can avoid probate by setting up a payable-on-death bank account. It depends on what’s best for you.
Family trusts might include your home and other properties you own, possessions, investments and your personal account. You set up the trust, usually with an estate planning attorney, by including instructions through a trust agreement, and you appoint a trustee to manage the fund. You transfer assets into the trust during your lifetime. Transfers often include changing titles of property and accounts to the trust or trustee. Trusts can cost hundreds or thousands of dollars to set up through an attorney, depending on the size of your estate. If you have a small estate with easily transferable assets, you can do it yourself for less than $100 through websites or materials and documents you purchase. Websites have step-by-step procedures. Books and software also offer instructions on establishing trusts for the do-it-yourself approach. However, legal guidance avoids chances of errors that could affect the transfer of your assets.
Payable-on-death accounts have similarities to trusts and personal accounts. They are sometimes called Totten, or testamentary trusts. You can easily set up a POD account with a bank as a checking or savings account. The accounts allow you to spend, save or invest the money during your lifetime. You can name one or more beneficiaries to receive money from the account upon your death. The accounts usually avoid probate, but state laws differ and you should check with an estate planning attorney regarding your particular circumstances.
You have the choice of including a personal account in the trust or creating a separate POD account. POD accounts require only that your notify the bank of your intentions, naming the beneficiaries. You can do this yourself and avoid the costs of an attorney setting up your trust. If you already have or plan to have a trust, it would just be a matter of including a personal account in the trust. You might want to set up a POD account for your spouse or family members separate from the trust. You could establish the POD account to pay debts or taxes. After your death, the beneficiary claims money in the account to relieve a financial burden.
Having a family trust allows you to stipulate conditions involved in your entire estate. For example, you might want your children to receive money from your personal account only when they reach a certain age. In this case, including your personal or other accounts in the trust makes sense so the money becomes available as they reach the right age. Trusts also help if you become incapacitated or too ill to handle your financial affairs. The trust enables the trustee or appointed person to take over.
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