No one wants to imagine or think about their own death, yet it is inevitable. This is why 70% of Americans do not have a living will. Despite what you don’t want to imagine, a living will and trust are important documents. Therefore, everyone should learn how to create a living will and trust.
Trust and will are some of the most versatile life-planning documents. Both documents help safeguard your wishes and transfer property to your heirs.
Similar Transfer Avenues
A living will and a living trust are almost similar. Both documents are avenues to transfer properties from the owners to their heirs.
A living will simply describe the assets and indicate who should get what portion of the assets or properties. A living trust goes beyond that to transfer assets on the will into the trust.
How it Works
The owner or person who writes the will is known as the ‘grantor.’ In addition, the will is based on a legal document called the ‘Declaration of Trust’. The document also names the ‘trustee.’
Through a living trust, the grantor retains ownership over the property until their death. Upon the grantor’s death, the trust’s control is turned over to the trustee, who distributes the property per the grantor’s wishes.
Why Create a Will
There are two main reasons why you should know how to create a living will and trust.
The first major reason is control. The two documents give you control of your life. A living will guides the doctor on what to do upon your incapacitation and control your estate upon your death.
The second main reason is peace of mind. The assurance that your affairs are in order gives you peace of mind.
Additional benefits of the two documents include fast distribution of your property when you die, avoiding conflicts, avoiding unnecessary taxation, and helping keep our life and financial affairs private.
Let’s find out how you can create these documents.
How to Create a Living Will and Trust
Creating the two documents seems like a daunting task. Fortunately, the process is no longer as complicated as it used to be. Today, unlike in the past when people had to consult a lawyer to create a will, you can now easily do it yourself.
The following are 10 steps on how to create a living will and trust.
List Your Assets
The first step of writing a will is to make sure you have a list of all your assets. You should know the total number of assets you own. You should also know the value of each asset that you own. One of the questions to ask yourself in this process is, ” How much is my house worth?”
Your list of assets or properties should capture everything including farms, houses, cars, equipment, schools, firearms, jewelry, bonds, stocks, and life insurance policies, among other types of properties and assets.
Decide What to Include in Your trust
After making a list of all the assets and accounts, the next step is to decide which assets should be included in the trust. Often, these are durable assets or properties that you are sure will outlast you. Examples include:
- All properties that are in your name such as custom home building, land, buildings, and vehicles
- Properties that could come in the future as investments, compensation, gifts, or insurance
- Properties and assets co-owned with someone else. Examples are properties you own with your spouse
- Intellectual properties
- Bank and retirement account statements and passwords
- Business interests and partnership
- Life insurance policies
- Your pets. Contrary to popular opinion, pets are not part of your family – the law treats them as property. Therefore, your will should name a trusted caretaker for your pets
- Family heirlooms. These are items that may be old but are very important to your family. Family heirlooms include things like your grandmother’s old seat. You can leave these items to people you trust to pass them down to the next generation
Gather the Ownership Documents
Legal documents show and prove that you’re the legit owner of an asset. It’s important to confirm that all the documents are intact before putting the asset into a trust.
You’ll need documents like deeds, logbooks, life insurance policies, and stock certificates in order to fund the trust or transfer the asset into the trust.
Gather the documents early and have them ready to ensure the smoothness of the next steps of how to create a living will and trust.
Decide Which Type of Living Will and Trust You Need
Trusts can either be single or joint. A single living trust involves just you as the sole grantor. A joint living trust usually involves you and another person – mostly your spouse or grantors.
Joint living trusts are common in married couples. It dictates the transfer of shared assets to your spouse upon your death and vice versa. Like a single living trust, other beneficiaries can be included in a joint living trust.
Single and joint living trusts are either revocable or irrevocable. Revocable trusts can be changed, modified, altered, or even dissolved at any given time. Irrevocable trusts are final. Changing or dissolving irrevocable trusts involves great difficulty and is almost impossible. Therefore, caution should be taken before writing an irrevocable trust.
Choose Your Beneficiaries
Choosing your beneficiaries is perhaps the most important step on how to create a living will and trust guide. One of the common mistakes people make when writing a living will is failing to name or unclearly name the beneficiaries.
You should clearly indicate the people you want as beneficiaries, including their full names, Social Security numbers, birth dates, and any other unique identifiers. Common beneficiaries for a living will include spouses, children, family members, friends, and charitable organizations.
When choosing beneficiaries, remember that life insurance policies and retirement benefits already have beneficiaries. Ensure consistency in this case.
How to Determine Who Gets What Possessions
The whole purpose of writing a living will and trust is to determine who gets what possessions. It’s one of the most important steps in this guide on how to create a living will and trust. Several factors should guide you in choosing who gets what possessions.
Purpose of the living trust – the reasons why you’re creating a living trust should drive your choice. Choose a beneficiary who will help you achieve your goal. Do you want your family to be financially well after you’re gone? Choose your spouse or eldest child. Is business continuity your goal? Go for your business partner.
State laws and rules – some states might restrict who you can have as your beneficiary. You should consult a will and trust attorney for legal guidance on your state’s specific beneficiary policies.
Know your options – spouses and kids are not always the beneficiaries. When choosing a living trust beneficiary, there’re many options. You have to decide whether to leave your assets to one or more people, catholic charities, or your estate, among other options. You’ll also have to decide whether proceeds will be paid out in lumpsum or periodically.
Age factor – your beneficiary should be younger and healthier than you. Also, most state laws prohibit persons under 18 years of age from owning items like firearms. In such cases, you need to create a minor’s trust and designate a child care trustee to manage the trust until the minor reaches a specific age.
Ability to manage assets – the last thing you’d wish for is someone to squander your hard-earned wealth. High-value properties should be designated to a beneficiary with high managerial skills.
Disqualification of benefits to your beneficiary – before naming a beneficiary, consider how your move may affect them as well. For example, if a person receives funds from the government because they’re disabled or aged, receiving your mansion may affect their payouts. Therefore, a lot of factors should be put into consideration to avoid disqualifying them from financial aid without a survival plan.
Contingency – a secondary beneficiary is necessary to fill the gap in case your primary beneficiary dies before you. In his case, the trust passes directly to the alternate without probate.
Identify Your Successor Trustee
Living wills and trusts are created mainly to avoid probate, hence the need to be careful when picking a successor trustee. A successor trustee is the ‘in-charge’ who takes over the management of living trust assets when you’re gone or become incapacitated.
The successor trustee can be an individual or an institution. They act without court supervision and privately handle your affairs with the help of a legal executor and accountants. The trustee’s job is to gather and distribute the trust assets to the beneficiaries as directed by the living will.
Write the Trust Document
It’s now time to put everything together. This is one of the vital steps in this guide on how to create a living will and trust.
Different states have different legal statutes that guide the format of a living will and trust. There are two common methods of writing a living trust:
Engage an attorney – a living trust attorney or any legal professional can help draw up the document for you. You can engage your family attorneys for help. The process can be slow and costly. The alternative is doing it on your own.
Do it yourself (DIY) – you can write your own living trust document by simply filling out forms. Most of these forms and templates are available online. When you DIY, there are no lawyers involved in the process. The process is quick and less costly.
Whichever method you choose, the process will be quicker because you’ve already gathered all the information in earlier steps on how to create a living will and trust.
Sign Your Will
Your document is now ready. But for it to be legally valid, you must sign it in your own handwriting. In many states, you have to sign the will in front of two or more witnesses, who are also required to sign the document. In addition, your witnesses shouldn’t be beneficiaries of the will and must be at least 18 years old.
Ideally, witnesses are people who are more likely to be around when you’re gone. In situations where your will is contested in court, witnesses may be called to testify.
Transfer Assets to Yourself as Trustee
To ensure the living will is effective, you must transfer the ownership of your assets to the trust with yourself as the trustee. For instance, in the case of land, you need to change the title deed to show that the land is now owned by the trust.
Store Your Will in a Safe Place
This is the last step in this guide on how to create a living will and trust. As with any other important document, make sure you store the will in a safe place. This could be in a bank, a trusted attorney’s office, a fireproof safe, or a safe deposit box.
Documents such as titles, passwords, intellectual properties, and life insurance policy documents should accompany the will. This makes it easy for your will executor to find all your important documents in your absentia. Let someone that you know, such as the successor, know where the documents are stored and have access to them.
Keep your Will Up To Date
You should update your will whenever you have a life-changing event such as getting married, having a newborn child, buying a property, divorce, a new boat sale, moving to a new state, or the death of an involved party.
Many people hold over estate planning until reality hits them when it’s too late. To many, living will and trust are for wealthy people or are too complicated. The majority don’t want any thought or conversation about their death. But, as seen in this guide on how to create a living will and trust, estate planning isn’t only for the wealthy. Neither is it all about death. A living trust gives you control over what happens to your assets both when you’re alive and after you’re gone.