Attorney Thomas B. Burton discusses how to make a Trust in 2021 to serve as the main vehicle for your estate plan. Attorney Burton discusses the main elements of a trust and what is legally required to form a trust. Attorney Burton also discusses the ways a trust can help you protect your estate and pass it on to the next generation free from the time, expense and paperwork involved with the probate court process.
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Transcript of Video: How to Make a Trust in 2021
Hello, I'm Attorney Thomas Burton and today's topic, I want to talk about how to make a trust in 2021.
So the start of the new year is a great time to think about your estate planning and I know in 2020, many folks I talked to who didn't have an estate plan realized the importance of having one in place. Unfortunately, due to the Covid-19 pandemic, we saw many people pass away at what would perhaps be considered younger than usual ages. So it doesn't matter how old you are, it's an excellent insurance plan to have an estate plan in place, so you can have the peace of mind of knowing it's done and go about your daily life.
Now, a trust is often a great plan for folks to bypass probate upon their death and provide for incapacity protection, if something ever happens to you where you suffer from a serious health illness while you're alive. What we do with the trust is we create a trust plan and we put your property into the trust. Once the property is inside the trust, it can be managed by the trustee. Generally the trustee is you during your lifetime but you can name a backup, a successor trustee for that situation I mentioned where perhaps you're having health issues and are temporarily incapacitated.
For example, someone with a serious case of Covid-19, may be temporarily incapacitated and trapped in that hospital or nursing home. If they have a backup trustee named, that backup trustee could take care of things for them on the outside if you will, outside the nursing home or the hospital. Pay bills, pay taxes things like that that need to get done during their period of incapacity. Then when they recover from the illness, it could be Covid-19 or something else, any other type of serious illness, they can begin acting as trustee of their trust again if they so wish. So trusts are a great tool because they provide for incapacity protection and not just for distributing assets after your death. However, after you're gone, then the trust lays out exactly who gets the assets and how they should be distributed and we can do all this through trust plan which then is a private administration after your death, instead of a will plan which would be public by definition and go through the public probate court process.
So in order to form a trust, you need the person who forms the trust, that's called the grantor or the settler of the trust. So that will often be you. Then you name the trustee of the trust and in a revocable living trust which is our most common trust used for estate planning and probate avoidance, the initial trustee can be you. You are the person holding and managing the property on behalf of the beneficiaries. Then the third person we need is a beneficiary. This person is often also you during your lifetime. You remain, you retain the ability to live in your home, use it, use your personal property and asset but after you're gone, the next beneficiaries will be the people you choose such as your children, grandchildren, relatives or other heirs you choose. So we have the person making the trust, the grantor. We have the trustee, the person administering the trust which is often you while you're alive and then a successor after your death and then we have the beneficiaries which is you during life and a successor after death but the great thing about a trust is we set it up during your life and it continues after your death and that's the key here.
It's sometimes I tell folks it's like setting up a company and if you look at Walmart, Walmart was set up by Sam Walton, while he was alive but it continues today because in theory, a company has a perpetual life. The same with the trust, it can outlive you and keep going after your death as long as you want. Generally, it's not that long after you die, your trustee wraps up your affairs and then the trust terminates but for minors, children under the age of 18, the trust may continue until they reach age 18 or 22 or 25. The great thing about a trust plan is you can also pick the ages at which your heirs receive their inheritance. So when I'm working with clients, I often say, we have new research showing recently that for many young people, the brain isn't fully formed until age 25 but Wisconsin law still says, you are an adult at age 18. So if you take no other steps, people will receive their inheritance fully at age 18. Now that may be appropriate for your children or grandchildren or it may not be but you're the one in the best position to know them and know if they could handle a large sum of money at age 18. If not, I suggest we stretch it out for them, perhaps leaving it to them in three installments at 22, 25 and 28 which is often the ages after someone has completed higher education if they're going to pursue that. During that time, the trustee can still use the money for their health, maintenance and welfare such as paying for college tuition, books, housing and supplies. So there's lots of great options you can do with the trust that aren't available in a will plan and that's one reason why trusts are such a popular estate planning tool.
Again, what we need to make a trust, it's you, the person making the trust, we need the trust document and then we need to name a trustee and name beneficiaries. After we put that all together, you sign it to make it valid and this is the general process and I'm talking about the process in Wisconsin but in most states, this is how you set up a trust and then the key after signing and making the trust is to put your property inside. So if you have a home, we want to deed the home into the trust, we want to retitle the bank accounts into the trust and we want to assign your personal property, everything inside your house clothing, jewelry etc. we can do that through a simple assignment we sign after you sign your trust. This is a great way to avoid probate on assets that can have a lot of value and can add up in those probate court costs and fees. So if you're looking at getting your estate planning set up in 2021, the start of the new year is a great time to do it and using a trust is one great tool, in fact, it's my favorite tool for probate avoidance planning and estate planning in 2021.
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Thanks for watching and we'll see you next time.
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