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When people think of a trust, they might imagine a heavy and intimidating legal document. The truth is a trust is essentially a relationship in which one person, known as the grantor, gives another the right to hold title to certain assets. A trust can be as simple or comprehensive as the situation requires.
Some U.S. states even allow oral trusts, that means the trust can exist simply by the understanding of the parties without having anything written down. The dangers of such an arrangement should be obvious. Most seasoned attorneys have plenty of horror stories about well-intentioned laypersons trying to do their own court filings or other legal work.
As we will discuss in this article, just because it is possible to create a trust on your own does not mean it makes sense to do so.
In straightforward cases, a person with no legal background can create their own trust using legal drafting software or standardized forms. If you plan on taking the do-it-yourself approach to estate planning expect to spend some time doing research to make sure you are on the right track.
There is a lot of information available in legal books, online resources, as well as sample documents, and even services that sell blank trust forms that need to be completed with personal information. If your situation is straightforward or very commonplace, you might find a standard form might that fits your needs.
You will need to take inventory of your assets, figure out the right type of trust form to use, and decide who should act as trustee. Most importantly, you will need to evaluate your own situation carefully to ensure that you are not missing any contingencies or leaving anything out of your plan.
There are many cases where professional counsel is almost always required. If your net worth is close to the estate tax exemption your heirs could certainly benefit greatly from estate tax planning.
Otherwise, if you have a special needs child, if you want your estate to be distributed according to very specific instructions, or if you would like help regarding funding the trust, then working with a professional is certainly advisable.
Even for more straightforward matters, working with an estate planning attorney can give you the peace of mind that you have an expertly drafted estate plan as well as a helpful resource for all of your questions.
A trust can only control assets that are contributed to the trust, also known as “funding” the trust. You can have a professionally drafted trust by the best attorneys in the country, but if assets are never placed in it, then the document will be essentially useless.
When thinking about funding a trust, people usually wonder about their home since it is often the most important asset they own. The main reason to place your home in trust is to allow your family to inherit the home without having to go through the lengthy and expensive probate court process. If the home is held by a trust, then it can be transferred to the beneficiaries privately and without any court involvement after the grantor passes away.
Another important reason to consider having your home held in trust is to plan for incapacity. A revocable living trust should include a successor trustee, who is responsible for managing any trust assets after the grantor is not able to do so.
In case of incapacity, the new trustee would step in to manage and take care of the trust assets. Without a trust in place, a family member would need to petition a court to appoint a guardian with the authority to manage an incapacitated person’s financial matters. This process is known as a conservatorship and is almost always best avoided if possible.
If you are working with an estate planning or real estate professional, then placing a house in trust should be a straightforward process. If you are using a revocable living trust to hold title to your home, you remain fully in control of the house and can sell or gift the property as if it were your own.
There are no changes to your property taxes or mortgage payments, and you can even cancel the trust in the future if you change your mind or if your circumstances change.
If you are drafting your own trust, it is imperative that you take care of the funding process as well. The funding process can sometimes take more time and energy than drafting the trust. In the case of real estate, ownership is determined by public records kept in the county where the property is located.
The legal document representing ownership of real estate is called a deed. As with other legal documents, there are numerous resources online and elsewhere discussing deeds and even providing blank deed forms to be filled by the parties.
The owner of a real property can always transfer a deed to another person without going through a lawyer or real estate professional. First, you will need a copy of your original deed. If you do not have your original deed, you can obtain a copy from the recorder of deeds in the county where the property is located.
For any real estate transaction you will need to determine what type of deed is required, as there are quitclaim deeds, general warranty deeds, beneficiary deeds, etc. Next you need to determine what is the appropriate deed form to use in the county and state.
Deeds are subject to formal requirements established by each state’s regulations. It is important to follow these requirements to ensure the deed is accepted by the county’s clerk and recorder, and to help avert any legal issues later. A deed must clearly identify the property being transferred.
The address, legal description and parcel identification number of the property must be copied carefully from the original deed since even a small typo could cause problems with the chain of title. The deed must include date, the parties to the transaction, and the proper legal language, such as words of conveyance and consideration.
Deeds can appear as relatively simple legal documents, often only one or two pages in length, but they are full of detailed information. Due to the complexity as well as the potential consequences caused by recording an erroneous deed, it is generally advisable to consult with an attorney or real estate professional before moving forward with a real estate transaction, even if it is only to transfer a home to a revocable living trust.
The main disadvantage of not hiring an attorney is that there is simply no guarantee the documents will be effective. Unfortunately, we have seen mistakes or inconsistencies even in very simple wills that were drafted using standard forms and without any professional assistance.
Documents prepared using forms or templates often come with instructions that must be followed carefully to avoid ambiguities. Since these documents are often only found or examined by attorneys after the author has passed away, there are no more opportunities to ask what was intended or what any unclear language could mean.
Such documents often end up at the discretion of a probate judge, making the legal process lengthier and more expensive. Naturally, having professionally drafted and comprehensive estate planning documents can help prevent ambiguities and conflicts down the line.
Another common drawback of the do-it-yourself approach to estate planning is that trusts are often not funded. As we mentioned above, a trust only works with the assets that are transferred to it.
Often, grantors are not aware or forget about the funding, they keep putting it off or are confused about what assets should go in the trust, or how to re-title their assets. The result is that trusts are either never funded or only partially funded. At the end of the day there might not be enough assets in the trust to carry out its intended purpose and any assets left outside of trust might need to go through probate.
When you work with Blake Harris Law, you can be certain that you have a reliable resource that can help ensure your estate plan is not just prepared but is ready to be implemented as well. If questions arise during the funding process, you also have an experienced team that can help you along the way.
Hiring an attorney to help with your estate plan can usually cost between one and several thousand dollars, depending on your needs and the complexity of your wishes. People with non-taxable estates, currently at $12 million dollars for individuals and $24 million for married couples, can expect fees towards the lower end of the spectrum.
Often, people who believe they will save a lot of money by drafting their own legal documents are surprised to learn working with an attorney is not as expensive as they expected. This is especially so when you consider the costs associated with getting the right information and tools needed and the risks involved for any mistakes made along the way.
It is also important to keep in mind that the legal fees cover not just the necessary legal documents, but a professional evaluation of your family’s situation to ensure you have a plan that meets your goals and needs.
If you are thinking about drafting your own trust or other estate planning documents, or if you are simply looking for guidance with this process, consider calling Blake Harris Law. Initial consultations with an experienced attorney are offered at no cost and will give you the opportunity to discuss your situation. Find out whether working with an attorney makes sense for you by contacting us today.