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The importance of a living trust
When the time comes to be financially responsible, it is often an overwhelming process for most people. Understanding how to effectively draft a living trust will not only give you peace of mind for after your passing, but also help sort out many legal issues and ensure that your wishes will be carried out. A trust is also beneficial in expediting asset distribution and can potentially provide the opportunity to avoid unnecessary taxes. As a living trust is likely to be one of the most important documents you will draft in your lifetime, it is important to know how to navigate it to ensure your peace of mind.
The first step is to begin by compiling a comprehensive list of all your assets. Assets are defined as investments (these could be stocks and bonds), insurance policies, your business interests, and all real estate. Then, as you start with the initial draft of your financial trust, ask yourself some key questions: Whom do you want to inherit your assets? Who will handle your financial affairs in case of incapacitation? Who will make medical decisions for you if you are no longer able to? With these questions in mind, you are well on the way to forming an effective legal trust and estate plan.
It is important to have a deep understanding of the nature of your assets, which may have to be distributed in the event of your death or incapacity. While some assets are easily identifiable and accessed (for example, your bank accounts), other assets can have designated beneficiaries who could have preexisting rights or overriding provisions made for alternate beneficiaries in a trust or will. As seen, many issues can plague the process of making an effective financial trust or will. Another part in planning one’s estate that should not be avoided is the selection of beneficiaries (those who can be named as specific recipients for insurance or retirement plans). Your last will must have the names of the persons who will receive the estate; it is important to designate both primary and secondary beneficiaries in the event of unforeseen circumstances (such as if the primary beneficiary passes before the author of the will). An effective will or trust will be prepared for such contingencies; if not, your property may be distributed in a fashion that does not reflect your wishes.
In some cases, using a testamentary substitute can be beneficial. The use of a financial trust grants post-death distribution of assets, and essentially contains the same beneficiary directions in a will. The difference is that a trust does not have to go through the probate process to be effective. The asset titles must also be changed so they are owned in the trust’s name prior to death, which means bank accounts and real estate must be held in the trust name so the directions can be applied. Done properly, your trust will fully carry out your intentions and wishes after death.
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