Trusts can be an important part of an estate plan for individuals and families who want greater control over how their assets are managed and distributed. Depending on the type of trust and how it is structured and funded, a trust may help manage assets during incapacity, provide for children or other beneficiaries, address unique family circumstances, and reduce the assets that must pass through probate.
Huntsville trust attorney Sara Doty helps clients throughout North Alabama determine whether a trust is appropriate for their estate planning goals. I prepare revocable living trusts, irrevocable trusts, and other customized trust arrangements based on each client's family, assets, and objectives. A trust should not be viewed as a one-size-fits-all solution; it should be coordinated with your will, powers of attorney, healthcare directives, beneficiary designations, and the way your assets are titled.
WHAT IS A TRUST?
A trust is a legal arrangement in which a trustee holds and manages property for the benefit of one or more beneficiaries according to the terms of the trust document. The person creating the trust is generally referred to as the grantor or settlor, and the person or institution responsible for managing the trust property is the trustee.
One of the most common estate planning trusts is a revocable living trust. During your lifetime, you can generally serve as your own trustee and retain control over the assets held in the trust. You can also name a successor trustee to manage the trust property if you become unable to do so or after your death.
A revocable living trust may provide several benefits, including:
- Providing for continued management of trust assets if you become incapacitated.
- Allowing you to establish detailed instructions for how and when beneficiaries receive trust property.
- Providing continuing management of assets for minor children or other beneficiaries.
- Allowing assets properly transferred to the trust to generally pass according to the trust terms without going through probate.
- Providing greater privacy for the distribution of trust assets than a probate proceeding may provide.
A trust is only effective for assets that are properly coordinated with it. Creating and signing a trust document alone does not automatically place your property into the trust. Funding the trust—which may involve transferring ownership of appropriate assets to the trust and coordinating beneficiary designations—is an important part of trust-based estate planning.
Not everyone needs a revocable living trust. Depending on your circumstances and goals, another type of trust or a will-based estate plan may be more appropriate.
DO I NEED A TRUST AND A WILL?
A trust and a will serve different purposes, and many trust-based estate plans include both. Whether you need a trust, a will, or a combination of the two depends on your assets, family circumstances, and estate planning goals.
When a revocable living trust is used as the primary estate planning tool, a pour-over will is often prepared as part of the plan. A pour-over will can direct certain probate assets that were not transferred to the trust during your lifetime into the trust after your death, subject to the probate process.
A will also serves purposes that a trust does not. For example, parents can use a will to nominate a guardian for minor children. The will also provides instructions concerning probate assets that may not otherwise be controlled by the trust.
Because assets can pass in different ways—through a trust, a will, beneficiary designation, joint ownership, or other arrangements—it is important to coordinate the documents and ownership of your assets as part of the overall estate plan.
I help clients evaluate whether a will-based estate plan, trust-based estate plan, or combination of the two is appropriate for their particular circumstances.
HOW DO YOU CREATE A LIVING TRUST IN ALABAMA?
Creating a living trust involves more than simply signing a trust document. The trust should be designed around your family, assets, and estate planning goals, and appropriate assets must then be coordinated with the trust.
The process generally includes:
- Identifying your estate planning goals and determining which assets should be included in the plan.
- Choosing a trustee and successor trustee to manage the trust property when necessary.
- Determining how trust assets should be distributed to your beneficiaries after your death.
- Preparing and executing the trust documents along with any related estate planning documents.
- Funding the trust by transferring appropriate assets to the trust and reviewing how other assets and beneficiary designations are structured.
Trust funding is particularly important. A revocable living trust generally does not control an asset simply because the trust document exists. How real estate, financial accounts, and other property are titled should be reviewed as part of implementing the estate plan.
I work with clients throughout the trust-planning process, from determining whether a trust is appropriate through preparing the documents and providing guidance on funding and coordinating the trust with the rest of the estate plan.
WHAT TYPES OF TRUSTS CAN BE USED IN ALABAMA ESTATE PLANNING?
Different types of trusts can accomplish different estate planning objectives. The appropriate trust depends on what you are trying to accomplish, the assets involved, and the needs of your beneficiaries.
Trusts commonly used in estate planning may include:
Revocable Living Trusts. These trusts can provide for management of assets during your lifetime and establish how trust property will be distributed after your death. A revocable trust can generally be amended or revoked by the person who created it while that person has the legal capacity to do so.
Irrevocable Trusts. Unlike a revocable trust, an irrevocable trust generally cannot be freely changed or revoked after it is established. These trusts may be used for specific estate planning, asset protection, long-term care, tax, or beneficiary-planning objectives depending on the circumstances.
Special Needs Trusts. A properly structured special needs trust may allow assets to be used for the benefit of a person with a disability while addressing the potential effect an inheritance could have on eligibility for certain means-tested public benefits.
Trusts for Children and Other Beneficiaries. A trust can provide continuing management of inherited assets rather than requiring a beneficiary to receive an inheritance outright. The trust can establish when and under what circumstances distributions may be made.
Pet Trusts. Alabama law permits trusts designed to provide for the care of certain animals. A pet trust can identify a caregiver, provide funds for the animal's care, and establish instructions for how those funds should be managed.
Pet Trusts: Providing for Your Furry Family Members
For many people, pets are an important part of the family. Alabama law allows a trust to be created to provide for the care of an animal that is alive during the trust creator's lifetime.
A pet trust can provide instructions concerning your pet's care and set aside funds for expenses such as food, veterinary care, grooming, boarding, medication, and other needs. The trust can also identify the person you would like to care for your pet and designate a trustee to manage the funds provided for the pet's benefit.
When preparing a pet trust, it is important to consider who will physically care for the animal, who will manage the money, how much should be set aside for the animal's anticipated needs, and what should happen to any remaining trust property after the pet's death.
A pet trust can be incorporated into a broader estate plan so that arrangements for your animals are coordinated with your other estate planning documents and wishes.
TALK WITH A HUNTSVILLE TRUST ATTORNEY
Choosing the right trust begins with understanding what you want your estate plan to accomplish. Whether you are considering a revocable living trust, an irrevocable trust, planning for children or other beneficiaries, or simply want to know whether a trust makes sense for your family, I can help you evaluate your options.
I work directly with clients to create trusts that are tailored to their assets, family circumstances, and long-term goals and coordinate those trusts with the other documents that make up their estate plan.
If you are considering creating a trust or would like to review an existing trust, contact Sara Doty Attorney at Law, LLC to schedule a consultation. I assist clients in Huntsville, Madison County, and throughout North Alabama with trust and estate planning matters.
Call (256) 519-9970 or contact my office online to schedule a consultation.
