All About Trust Account: Pros and Cons.

What is a Trust Account

A Trust Account (also known as a Living Trust) is a special account that holds money for certain people you want to give it to after you pass away. When you die, the people you named in the trust account will receive the money. This is different from using a will, where it takes a longer and more complicated process called probate to give the money to your loved ones.

Do I Need a Trust Account?

Having a living trust can save your family time, trouble, and money when they get your money. Unlike a will, which goes through probate, a living trust allows the money to be given to the people you chose almost right away, without going through the probate process.

What is the Difference Between Living Trust and a Will?

Both living trusts and wills are legal documents that help decide what happens to your things after you pass away. With a will, you can also name someone to take care of your children and pets, but the instructions only take effect after you die.

The main difference is how your money is handled. A will goes through probate, which can be slow and expensive. Also, probate makes your personal information and who gets your money public. On the other hand, a trust doesn’t go through probate, so your money goes directly to the people you named in private.

Who Should Have a Trust Account?

Living trusts are helpful for people with a lot of money or complex assets. Also, business owners with many interests, people with multiple properties, or real estate in different states can benefit from a trust. Anyone who wants to avoid probate and keep things private should consider having a trust.

How Much Does a Living Trust Cost

Creating a living trust can cost different amounts for different people. If your situation is simple, you might be able to do it for free. But if you have a lot of money or property, you might need a lawyer’s help, and that can be expensive.

There are a few things that can make the cost go up:

• If you need a lawyer to help you write and check the trust documents, that costs money.
• If you have more than one person in charge of the trust (called trustees), that might mean more costs.
• Sometimes, it’s a good idea to have an accountant help with taxes and money matters, but that can add to the overall cost.

Remember, besides these expenses, there might be other fees, like transferring the ownership of houses or cars into the trust, or paying taxes on money the trust makes from investments.

So, how much a living trust costs depends on your situation and the people you need to help you with it. It’s important to think about what’s best for you and get advice from experts to make good decisions.

Advantages of Trust Accounts:

• Avoids probate, so the money goes to your loved ones faster.
• Keeps control of your money even if you can’t make decisions later.
• Puts all your money in one plan for easy management.
• Provides privacy, keeping your financial details private.
• Distributes money according to your wishes.
• May help reduce taxes and expenses.
• Setting up and managing a trust is affordable and not hard.
• You can change or cancel the trust whenever you want.
• Hard for others to challenge or dispute.
• Protects the money for minor kids or those with special needs.
• Avoids issues with shared ownership and accidental disinheritance.
• Offers professional management with a corporate trustee, if needed.
• Gives peace of mind that your money will be taken care of.

Disadvantages of Trust Accounts:

• You need to pay some money to set it up and deal with legal stuff.
• There’s some paperwork and management involved over time.
• You have to transfer your money into the trust, which might take time.
• Not everyone needs a trust, so it depends on your situation.

Revocable vs. Irrevocable Trusts

Revocable Trusts can be changed or canceled while you’re alive. You’ll be in charge of the trust and its money. When you pass away, a backup trustee takes over, especially in shared trusts made by spouses.

Irrevocable Trusts can’t be changed once they’re set up. They have specific purposes, like reducing taxes, but you give up control over the money.

Advantages of Revocable Trusts:

• Avoids probate, so the money goes to your loved ones faster.
• Keeps control of your money even if you can’t make decisions later.
• Provides privacy, keeping your financial details private.
• Distributes money according to your wishes.
• You can change or cancel the trust whenever you want.

Disadvantages of Revocable Trusts:

• Costs money and takes time to set up, especially for complex situations.
• You won’t get direct tax benefits as you keep control over the money.
• Creditors can still access the money, so it’s not fully protected.

Benefits of an Irrevocable Living Trust:

• Protects the money and reduces taxes.
• Offers more protection from creditors.
• Useful for special purposes like charitable planning.

Disadvantages of an Irrevocable Living Trust:

• Once set up, it can’t be changed, which limits flexibility.
• You give up control over the money, which may not be ideal for everyone.
• Changing it requires consent from all beneficiaries, which might be hard.
• The money no longer belongs to you, affecting certain benefits.
• There may be tax implications, so careful consideration is needed.
• It can cost more in legal and administrative fees.
• Setting it up takes more time than a revocable trust.
• You can’t use the money without trustee approval.
• The trust’s terms might limit how and when heirs can access the money.

How Do I Make a Living Trust Account?

To set up a living trust, follow these steps:

1. Decide if you want an individual or shared trust.
2. Select someone to manage the trust and give out the money after you pass away.
3. Decide who will receive the money from the trust and the terms.
4. Create the trust document with a lawyer or special software.
5. Choose which money and assets to include in the trust. 
6. Sign the document in front of a notary public.
7. Transfer your assets into the trust as needed. If you don’t transfer your assets, they won’t be included in your trust.

It may take some time, but it brings all your money under one plan and helps avoid future problems.

What Items are Typically Transferred to a Trust

In a trust, you should put things that have titles, like houses, stocks, bank accounts, and more. Also, add things like jewelry, clothes, art, and furniture, which don’t have titles. These are the items you include in a trust to keep them safe and give them to the right people later.  You may want to ask an attorney, trust officer, financial adviser, or insurance agent if you feel you need help.

Do I Still Need a Will if I Have a Living Trust?

Yes, even if you have a living trust, it’s important to have a will. A living trust helps avoid the need for a will in some cases, but you still need one for specific reasons:

• To name a guardian for your kids: A trust can’t do that, so you need a will.
• To cover assets not in the trust: Sometimes, you forget to transfer everything, and a will helps with those things.
• If you pass away without a will or trust, the law decides what happens to your money.

Can a Living Trust Reduce Estate Tax?

Most people don’t need to worry about estate taxes because they apply to very large estates.   Assets in a revocable trust will have to pay estate tax, while assets in an irrevocable trust generally won’t. Whether a living trust helps with taxes depends on where you live and how much your estate is worth.

Should I Consider a Professional Trustee?

While you can be the trustee of your living trust, some people choose a professional trustee, like a bank or trust company. They know how to manage money and are reliable. It might be a good idea if you don’t have the time or ability to do it. Also, appoint an alternate trustee in case the main one can’t do it.

Register and Store Your Trust in a Safe Place

Register with The U.S. Will Registry

The U.S. Will Registry is a national free service to the public, attorneys and financial advisors offering registration of wills and trust.  Registration assures that your family and attorney will know where it is stored avoiding any chance of it getting lost.

Store a Copy of Your Trust and Will Online

Keep a digital copy of your living trust in a safe place online. Sidedrawer.com offers free iCloud storage for this purpose. This way, you’ll have a backup in case the original is lost or damaged.

Inform Loved Ones

Tell your alternate trustee and beneficiaries about the registration and storage of your living trust and will. They won’t have access until you pass away and a death certificate is provided. Make sure those who need access are listed in your account as having permission.

Also, inform your attorney about the registration. They can access the registry and cloud storage to help your loved ones find the trust document quickly if needed.

To Summarize

Creating a living trust is an essential part of estate planning. It helps distribute your money faster and keeps things private. Although not everyone needs a living trust, it can be very useful in certain situations. Remember to set up a will too, as it covers things that a living trust can’t do. If you need help managing the trust, consider a professional trustee. Also, register your trust and store a copy online for added safety. Taking these precautions ensures that your wishes will be followed, and everything will be taken care of properly when the time comes.