Five Key Points to Prepare Before Setting Up a Living Trust!

Today, we will discuss what we need to consider when setting up a living trust to avoid probate and ensure successful asset transfer.

Key point 1: Who will be the beneficiaries?

The beneficiaries are typically one’s own children (including adopted children) or institutions such as charitable organizations or churches. You should consider how much to give and how to give it, whether as a percentage or as a specific amount.

Key point 2: How will the beneficiaries receive the funds?

This is very important. Usually, parents leave their assets to their children, but there are different scenarios to consider.

Scenario 1: Mr. and Mrs. A pass away early. If they have included an age restriction in the trust, their children can only receive the interest until age 50; then, they will receive 1/3 of the assets at age 50, another 1/3 at age 55, and the final 1/3 at age 60. This way, because the assets do not belong to the children, they cannot be divided in the event of a divorce or lawsuit.

Scenario 2: Mrs. A is very young and Mr. A is concerned that she may remarry after his death, in which case the assets would go to someone else. To prevent this, they can split one trust into two after Mr. A’s death. The portion for Mrs. A can be reserved for their children after her death, rather than being given directly to her new husband.

Scenario 3: Mr. A is a US citizen, and Mrs. A is not. If Mr. A passes away, Mrs. A will be immediately subject to estate tax. However, if they add a clause to the trust that the portion left to Mrs. A will become a separate trust and cannot be taken away, they can avoid paying estate tax immediately.

Key point 3: Three important roles in the trust after a person passes away, and who will manage the assets?

Ideally, the same person should hold all three roles:

1. Trustee – The successor trustee will manage the assets in the trust after the person’s death.

2. Executor – The executor will manage the assets that were not included in the trust or not properly transferred to the trust and help arrange for probate.

3. Agent – If the person becomes incapacitated or unconscious, they will need an agent to make financial decisions on their behalf.

Key point 4: Healthcare agent

At the most critical point in a person’s life, when they are at the end of their life and unable to make decisions for themselves, who will make medical decisions on their behalf? A healthcare agent! Since a regular agent will lose their power if the person becomes incapacitated, a special healthcare agent can be designated in the trust.

Key point 5: Guardian for children

If your children are still young, you should consider finding a guardian to take care of them and oversee their daily lives.

Summary: The five considerations that need to be made before setting up a living trust are the trust beneficiary, the method of asset withdrawal by the beneficiary, the three important roles, the healthcare agent, and the children’s guardian. If you want to learn more details about trusts or want to establish one, please feel free to contact us at TransGlobal. We not only have the latest and most comprehensive trust information, but also a professional team to provide you with comprehensive services.

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This article is for informational purposes only and should not be construed as financial advice or legal advice. Please consult with a professional to develop a strategy that is right for you. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. TransGlobal Advisory, LLC (TGA) does not provide legal, tax, or accounting advice. You should consult your personal tax or legal advisor before making any financial decisions.