This isn’t about the trust that is earned from another person, although it does come into play with establishing one. It isn’t legal or financial advice either. It’s to consider if you may need a trust.
Many estate attorneys cite the origins of a trust in 12th-century medieval England where “use” arrangements were created by knights departing for the Crusades who needed to transfer property ownership to trusted friends. However, the actual concept goes back much further. The ancient Greeks had a concept known as “epieikeia or that which is appropriate or right. To behave with epieikeia meant to look not to the law but toward the lawgiver; and not to the letter of the law, but to the intention of the lawgiver.”
A modern, personal trust is a formal, legal document that allows you (the lawgiver) to define and govern (the intention) of what happens to your assets either under certain circumstances or upon your death rather than a probate judge or the governing state who knows nothing about your intentions.
While roughly 81% of adults aged 72+ have a will, that number drops to about 43% for those over 55. Only about 11% of Americans have a trust. I had no idea what a trust was until my husband and I were advised by our estate attorney in Albuquerque to establish one before moving to California to avoid probate court hell.
It wasn’t until I ended up being the “ghost” executor of an estate with a trust that I fully understood how it actually works and why a trust is beneficial. The estate attorneys have general guidelines on how to transfer assets. The internet and AI summaries provide some additional information. However, it was the actual experience working with trust assets, when I realized our trust wasn’t even set-up correctly, after 3 states, 3 estate attorneys and 3 revisions the last one during Covid signing documents in our vehicle instead of an estate attorney’s office.
Things to consider on your intent with your assets and what happens to them.
A will only controls the distribution of personal property such as furniture, electronics, jewelry and vehicles. If the estate includes real estate or has value that exceeds a certain threshold ($150,000 for Illinois), the will must go through the public probate court process which is different for every state.
If you own real estate in multiple states, each state will have its own probate process that will need to be adhered to. Many retirement communities require that you purchase an independent living home before progressing to assisted living and eventual long-term care.
If you own a business.
If you don’t have children capable of going through the probate process and selling your real estate. Or you want to protect your house for you to continue living there while your spouse is in a care facility without long-term care insurance.
A will becomes a matter of public record when filed in probate court, a trust remains entirely confidential. Your financial details and beneficiary designations stay private.
How your assets are distributed according to your specific intentions.
How to transfer your assets to the trust.
Transferring property to a trust is dependent upon location and is one of the largest assets in the trust. Titling companies and real estate attorneys can assist with this process.
Bank accounts are what I completely missed transferring for years. If you have a will with no real estate but you have significant funds in these accounts, you can designate your accounts as POD’s or Payable-on-Death naming a beneficiary to automatically receive your funds after you die, which avoids the long court probate process.
I set up new bank accounts in our trust name and have had to redirect all transactions through these new accounts. Few financial institutions offer a high-yield savings account that can be set-up in a trust.
Life insurance policies, retirement accounts (401(k), IRA, etc.) have beneficiary designations. The first beneficiary is typically your spouse; the secondary beneficiary is the name of the trust.
In the past, brokerage accounts didn’t usually allow beneficiary designations, but this is changing. Most now offer joint accounts, beneficiary designations and Transfer on Death (TOD) or Payable on Death (POD) registration. This lets your investments go straight to your intended people or charities.
Some financial institutions (banks and trust companies) can act as executors or co-executor, commonly known as corporate executors. However, they often charge higher fees than individuals, typically structured as a percentage of the estate’s total value and may decline to take smaller or less complex estates.
The assets we now accumulate are greater in number and carry more value. Not having an estate plan puts an undue responsibility on our heirs to figure out and work through. Probate court takes a minimum of 6 months to a year but can often take several years. Even the estate I managed with a trust and bank co-executor took 15 months to distribute and complete. With all the accounts, logins, passwords, passkeys of modern personal finance, I can’t imagine encumbering someone with no experience or direction of my intentions.
Transfer Property Into a Trust
How to Fund Bank Accounts Into a Trust
Can I Put My Business Into A Trust
Featured Image – Dysart, IA. Photographer C.N. Wauters