Attorney Thomas B. Burton explains the key components and documents included as part of a revocable living trust plan in the latest episode of Estate Planning 101. Estate Planning 101 is our long form educational video series, where we explain complex estate planning topics and issues in order to educate and inform and empower you to take charge of your own estate planning.
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Transcript of Video – Key Components of a Living Trust Plan
Welcome back to Estate Planning 101, I'm Attorney Thomas Burton and today's topic, we're going to be exploring The Key Components of a Living Trust Plan.
So a living trust plan is by design, designed to avoid probate on your assets, after death and as part of this plan, there's more than just a trust involved. So when we talk about Estate Planning, we are talking about a complete set of documents and in revocable living trust planning, I wanted to go through with you today, what the most common key documents are going to be involved with this plan, in order to accomplish your goals. So today I'm going to lay out the documents, I've got about 10 on my list and explain to you each one as I go through them. So hopefully you will better understand how each document works inside of your trust plan and this new series, Estate Planning 101, is a long form educational series, designed to educate and inform you, in order to take charge of your own estate planning.
So living trust or revocable trust are two common terms, terms you'll hear in the estate planning industry, used for a revocable trust and a revocable living trust, I'm going to put that as number one on our list, sometimes you'll see it referred to as a rev trust, so for today I'm abbreviating it, is the key document as part of this plan and the reason we call it revocable means it's changeable during your lifetime, you set it up, it's changeable during your lifetime, just like a will, you can change it at any time but in fact, the trust is in my opinion, easier to change because often, all you need to do to make a change is execute an amendment in front of a notary public, instead of the formalities required with a will with two witnesses. So the revocable part means changeable during your life then after death, it generally becomes irrevocable because you don't want what you put down to be changed such as your beneficiaries and who the assets go to after your death but during life, it's revocable and the living part comes from what we call an 'inter-vivos trust' meaning you made it during your life. So it's the most common document we use as what we call a 'will substitute', instead of having assets passed through a will and have to go through probate court, we have them passed through a revocable living trust. So that's going to be the key document, here, we'll put our trust here, that we want all our assets to pass through the trust.
Now the revocable living trust will be the basis of our plan but second, we're going to pair that with what we call a 'Pour over will', and this is just a term we use in estate planning, it's a regular last will and testament just like any other will but the reason we call it a pour over is because it's going to be specifically designed to work with your trust plan. So let me put up here the will, generally it will be shorter because the trust is going to be longer and have all of what we want inside it about what happens but the will is designed to pour over into the trust, if there's some asset you forgot to re-title into your trust, the will will pour it over after death and that's where we get this term, 'pour over will'. So if you think of a pitcher pouring water into the will, that's what it does. Now I always tell my clients, we don't want to have to use this document but it's built in there as insurance policy, just in case and a classic example might be a piece of real estate, let's say you inherit a one-fifth interest in a cabin from your great aunt and you didn't even know you were named in that cabin estate plan and let's say, you inherited just one month before your death and you were in poor health, you didn't have time to get it into your trust, well, the pour over will would get it in there. So I'm going to talk in general today about how I do the trust planning at my office but these are going to be key documents you'll likely see with other attorneys. No matter what state or where you're working with the attorney. It may vary a little but this will be the key component of a trust plan because I want this to be helpful to people no matter where you're watching, all over the country.
So those two will start with then third, this is one of my favorite documents, it's an assignment of personal property, we call it and this is really what's great about a trust plan, is as soon as your trust is signed, we can assign all of your tangible personal property to the trust, simply by contract law. We have to set up the trust, sign it and form it and for purposes of a trust, the person setting it up is called the Grantor or the Settlor, once it's signed, once we form the trust, which at my office, you do on the date you sign it, we'll sign it first then we have the trust in place because it's spraying into life on that date. Then we can use this other document, assignment of personal property and it's generally a one-page sheet and we assign all your personal property to the trust. Now what is tangible personal property, it's anything without a title. If you think about the items inside your home, like the furniture, jewelry, dishware this marker for example, is personal property. It has no title but because it's something you possess, you own it. So lots of stuff inside your house is personal property. Things in the garage, mowers, wagons, wheelbarrows, implements, tools, guns, all of that can be assigned to the trust and that's what's so great about a trust plan because often these are the items that are the biggest pain to deal with in a probate court administration because you have to assign a value to every item you own, in probate court and that all becomes public and then they assign a fee based on the value of all those items. So I love as soon as we get our trust signed, we can assign the personal property easily, over to the trust.
Next, this won't apply in every instance but similar to personal property, we can assign a business interest easily to the trust because a trust comes into being during your life and is designed to last beyond your death. It's like a company, that way I say sometimes, you set it up during life, it continues after death until whatever point you choose, whether it's your minor children or grandchildren, reach a certain age or whether it's just distribute the asset but it continues through your death.
So similar to the assignment of personal property, we can do an assignment for your LLC for example. LLCs are a great thing, in fact after you form an LLC, it becomes tangible personal property. We can sign a one-page assignment, put that inside the trust, immediately avoid probate on that interest.
Next a key part of a trust plan is a financial power of attorney. Now, if you put the trust in place and you re-title all the assets, in my opinion, the financial power of attorney becomes less important because your trustee, if you're incapacitated, can manage the trust assets under the trust document. That's the best and it's what the banks are easiest to work with and the most familiar, however, we'll do a specially designed POA to work with the trust and again it will say if there's some asset that wasn't placed inside the trust like this cabin up here, the one-fifth interest, your your power of attorney can transfer it into the trust for you. So that would be key, let's say, you're incapacitated when you inherit that interest, we've got the financial power of attorney.
Next, we have the health care power of attorney and this should be part of your plan whether it's a will or a trust plan in my opinion, this names an agent to act for your health care affairs, if you are ever incapacitated. So I always say to my clients, your health care is really your most important thing because when you're alive, what you have is your health and your life to look after. So I like to always name one agent and a backup agent inside this document. That's a key part of your plan and it can't be done just inside the trust, this is different by law, this is regarding your own health care, so sometimes it can seem like we focus on the trust when we're talking about trust planning but we're really talking about the whole plan which in my mind, includes these different documents.
Next I like to pair this with an independent HIPAA release. Many of you know HIPAA is the federal law that governs the release of medical records and without a HIPAA release, your medical providers will not release any information to anyone other than you. This is a problem, if you're incapacitated. Now your healthcare power of attorney should include a HIPAA release but I like to do a stand-alone one, just to be extra sure and it will name any successor trustee of your trust, to get access to those records because inside the trust, we have a provision saying, if you're incapacitated, the successor can take over. Well, if we need to trigger that incapacity provision but the successor trustee is not the same as the health care agent, there can be a problem getting the doctor's letter and the appropriate medical records to allow them to act. So the standalone HIPAA release stands in that gap, solves that problem.
Next, in Wisconsin, I like to do what's called an 'Authorization for Last Disposition' and I know that's a mouthful but basically, this is the body, excuse me, this is the document that determines what happens to your earthly remains, your body, after you're gone. So you think about it, a lot of times, we'll name the same person as we name in the healthcare power of attorney but you have two choices to make, burial or cremation and then legally, they must follow your wishes on this in the document. If you have a final resting place such as the cemetery plot picked out, you can also put that in this document. So this information never goes inside your will or your trust, it's separate by law and I suggest you lay it out in that document, state of Wisconsin has it set up that way, it's a great way to do it.
Okay, number 9, this is something I do at my office, it's called a 'Certificate of trust' and this is really for the clients to make it easy to manage your trust. This is a 3-4 page short document, that's basically like a crib notes version of your trust. So the certificate of trust gives the bank and financial institutions, the highlights of your trust. Namely, they often want to know who is the trustee, what is the name of the trust, what is the date of the trust and we will sign this at my office and I notarize it for you, the bank will often accept this, instead of you giving them the entire 20-some page document. Another nice thing is, it keeps the ultimate provisions of your trust private, they often don't need to know all this information because you can change it at any time until you die but it gives them what they need to know in an easy readable format.
So those are the main documents we're going to want to put in place and execute on the date we sign your trust.
Now I'm going to talk briefly today about two more items before we wrap up. Number 10 on the list is retitling bank accounts and financial accounts into the trust. Now generally, if you didn't have a trust before, you'll have your bank accounts in your individual name and what we need to do with these, let's put them up here, bank account, is it will have your name on it here. Well instead of your name, we're going to want to retitle into the trust name and that's where the certificate of trust comes in handy. Each bank will generally have a form they want you to fill out for your checking and savings account and the certificate will give them the name of the test that they need to fill in and then after that point, your bank account will read the name of your trust instead of your individual name. This is key to ensure that this account outlives you, otherwise what the bank likes to do is freeze those accounts at death and then they want you to open a probate action generally, to get access to them. So the trust is designed to avoid this as soon as we get the trust signed, we put them in and we avoid all that upon death.
Finally at my office, what I include with my trust package is the deed for your home or primary residence and this will often be a Quitclaim deed and we will transfer title to your home, into the trust. So similar to the bank accounts, your home has a title and a lot of most people, when they buy their home they buy it in their individual name, so you will just grant title from your individual name to yourself, if you're married to you and your spouse, as a married couple from your individual names to yourselves as co-trustees of our revocable trust. So if you're the Smith's, the Smith revocable trust and in order to do that, you'll sign that deed again, in front of a notary or a lawyer can authenticate your signature, after we sign all this that deed then gets recorded with the registered deeds office. So this is a key part I like to accomplish right away, is record the deed with the register of deeds. Then the title to the home and any other real estate is inside the trust immediately and could be managed by the trustee in the event of your incapacity.
So these are the key components, what I consider key components of a living trust plan. Each document serves a unique purpose inside the plan and in my mind, is essential to accomplishing our goal of avoiding probate on all your assets.
Now if you watch some of my other videos you'll know that a will alone does not avoid probate. The way to avoid probate is through a trust but the trust plan is what helps us avoid probate on all of the assets and in general, a trust plan costs more to set up because as you can see there's more documents here involved in the drafting and set up in the get-go but after it's set up, it's designed to save you money at death by no probate at all upon your death and my goal with clients is always if we're going to take the time and effort to set up a trust plan, let's avoid probate completely upon your death.
So I hope this video has been helpful to you to as an overview of the key components of a trust plan. If you have questions about the trust plan, you can contact office or drop them in the comments, we'll try to get back to you as soon as we can.
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Thanks for watching and we'll see you next time.
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