Embarking on your new life together, you may not want to think about what would happen if one of you became unexpectedly ill or disabled. Although you may not have children yet, a trust is an advantageous estate planning tool that protects your interests in the event of death or the inability to manage your affairs while alive. Due to the variety and complexity of trusts, you need to develop an estate plan with the guidance of a licensed estate planning attorney in your state.
Basic Trust Plan
You will need a basic trust plan that includes a trust setup, a will, a living will and a health care proxy. A basic trust will cost between $1,600 and $3,000, depending on the complexity, according to CNN Money. According to Mike Janko, executive director of the National Association of Financial and Estate Planning, you should develop a trust if you have more than $100,000 in assets, own real estate or a valuable collection, such as art, for example. The living will or advanced directive document covers your wishes for end-of-life-care. A durable power of attorney for health care authorizes your trustee to carry out your advanced directive.
A living trust is the most common and will protect you if you become incapable due to physical or mental illness. If you make a trust with your spouse, that spouse will have authority over all of the trust property while you are incapacitated. Before the successor trustee can take charge of trust property, a licensed doctor must certify that you are incapable of physically and mentally handling your own affairs. The successor trustee has the legal authority to manage all property in the trust and to use it for your health and welfare. The spouse who takes over the trust is responsible for filing an annual income tax return for the trust.
Durable Power of Attorney
Assets must be titled in a trust or they may become subject to probate. In addition to a living trust, you need a durable power of attorney for financial management — a document that you can use to authorize your trustee to make financial management decisions for property that was not titled in the trust. Trusts are difficult to challenge legally, which makes them more reliable than just a will that can be contested by conflicting heirs, for example. To legally challenge a trust, a contender must prove that you were mentally incompetent when you originated the trust, or that the document is faulty because the signature was forged.
The advantages of having a trust include being able to distribute your assets to your spouse or other relatives on your own terms, which you must state clearly in the trust, with the help of your attorney. Other benefits include maximizing estate-tax exemptions and the opportunity to provide for a disabled relative without disqualifying him from Medicaid or other government aid. Trusts also provide greater protection against creditors or lawsuits that arise when one spouse has died or becomes incapacitated.
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