Telling Children About an Inheritance and Establishing a Living Trust
Now that you’re starting the estate planning process, you’re thinking about the best way to provide for your loved ones once you pass away. After all, you want to avoid any conflict within your family, ensure that your wishes are fulfilled, and do everything you can to guarantee that the process goes as smoothly as possible. That’s why you’re contemplating telling your children about an inheritance and establishing a living trust.
Entz Burton & Associates, estate planning lawyers, have assisted Oklahoma families and family-owned businesses with estate planning and business law for over 30 years. Reach out to us today to schedule your free consultation and learn if you need a living trust.
Letting Your Children Know About an Inheritance
It’s critical to talk to your children about what amount of money they’re set to inherit once you pass away when you’re going through the estate planning process. They can plan for the future and you can answer any questions about the inheritance. For instance, if you aren’t planning on dividing up the inheritance equally among your children, you can explain to them why.
You may also want to discuss where that money is coming from; for example, you can talk with them about how you worked hard and invested your money, and then teach them how to do the same. You can also talk about the fact that there may not be much of an inheritance for them. If they expected a large sum of money when you passed away and now they know they won’t receive it, they can better plan for their financial future.
If they are receiving a large sum of money, you can talk to them about good personal finance habits so that they don’t spend everything right away. You want to set them up as much as you can while you still can, and this is a great way to do it.
Having this discussion can be very productive and leave your loved ones feeling like they’ve had all their questions answers and concerns addressed. Otherwise, if you pass away without explaining anything, then they may feel robbed of that conversation.
Once you’ve had this conversation with your children and any other loved ones involved, you can then take the steps to protect the money, like establishing a living trust.
What Is a Living Trust?
A living trust is also commonly known as a revocable living trust, which is the most common type of trust. It allows you to have control over the trust and change it until you pass away. Upon death, the successor trustee whom you choose will be given control over the trust. They will distribute what’s in the trust based on your wishes. You can designate any competent adult as the trustee, and you can even use a trust company or bank if you want. A revocable living trust is different from an irrevocable trust, where you relinquish all control over it.
Once you set up the trust, you can then put your assets into it. Assets would include your real estate property, bank account funds, and investments. You won’t own these assets anymore because the trust now owns them. However, you can change the trust at any time, and if you earn any income from the assets in the trust, then it’s goes to you and it can be taxed.
You may think that living trusts are only for the wealthy, but that’s just not true. They can carry many benefits for people no matter how much money they have.
Advantages of a Living Trust
With a living trust, you can avoid probate, which is a public, lengthy, and expensive process. You can protect your privacy, as well as the privacy of your beneficiaries, and minimize your estate taxes. Plus, your assets will be transferred to your trust beneficiaries faster.
If you are married and you have separate property that you acquired prior to the marriage, then setting up a trust will allow you to separate your assets from community property assets, too.
Disadvantages of a Living Trust
The biggest disadvantage of a living trust is that setting it up can be expensive; it may cost thousands of dollars. However, the expense will likely be worth it once you weigh the cost of probate and taxes.
You’ll need to re-title your property that goes into the trust and put it in the name of the trust. This can also take time and cost money. You’ll have to pay administrative expenses like trustee and investment advisory fees if you’re using a bank or trust company as the trustee. And if you have ownership interest in a living trust – for example, you name yourself the trustee – then your assets won’t be as well protected.
How to Establish a Living Trust
While you may think it’s a good idea to fill out a living trust document online, DIY style, this could prove to be disastrous for your estate planning process. It is not something to be taken lightly. If you don’t know all the rules surrounding living trusts and estate planning in general, then you could end up taking the wrong action. Then, your wishes may not be fulfilled. You might not even know you messed up. Your family could find out after you’ve already passed away, and they’ll have to deal with the consequences… which could be devastating.
Instead, it’s best to get in touch with an estate planning attorney, who can help you establish a living trust and write up any other documents you need for your estate plan. They will have the experience and guide you in the right direction. When it comes to estate planning, one size fits all just doesn’t work.
Once you have your trust document, keep it in a safe place and let your successor trustee know where it is. You can always ask your estate planning lawyer for advice on talking to your children about their inheritance as well. They’ll have the experience with other clients to know how to approach this delicate topic in the most sensitive way possible.
You don’t have to wait until you’re retired or in your senior years to begin the estate planning process. If you have children – even if they’re young – then it’s best to get a head start as soon as possible. Then, you’ll know you and your loved ones will be protected no matter what happens in your life.
Contact Entz Burton & Associates
If you need help creating a living trust for your estate plan, then get in touch with Entz Burton & Associates today for your free consultation. Call us at 405-773-9800 or 800-633-7230, or contact us on our website. We look forward to hearing from you and helping you with all your estate planning needs.
Attorney J. Michael Entz at Entz Burton & Associates is an experience lawyer in estate planning law, business formation and asset protection serving the families in Oklahoma City and Weatherford office.
