Trusts are an important tool for estate planning. Understanding how to use these trusts is important because any mistake that is made with a trust could be a very costly error. It is imperative that you think carefully about the type of trust that you are setting up. This includes thinking about the purpose of the trust and your goals.
One type of trust that you might use is a revocable trust. This type of trust can change if necessary. Some people find this aspect very important, but there are some points that you should know before you get the trust created.
The fee structure
Typically, you will pay more up front to get a trust set up than what you will pay to get a will created. Don't let that fact deter you because setting up the trust could end up helping your loved ones when you pass away.
In most cases, your decedents will pay more for an executor than they will have to pay for a trustee. The fees that an executor will get for handling an estate are based on the size of the estate. Generally, most people will pay at least five percent for executor fees. Trustee fees are usually around one percent.
A living trust enables a person to hold more FDIC insured money in a bank account. The living trust allows a person to receive an extra $250,000 per beneficiary. This means that if the person has more than one named beneficiary, holding more than $250,000 in a single bank account and still having it FDIC insured is possible. With two beneficiaries, the bank account limitation for FDIC coverage is $500,000. For people who have six or more beneficiaries, the shares must be equal or the maximum coverage for this insurance might not be the full amount.
Choosing assets for the trust
When you are moving assets into the trust, you need to think carefully. Many financial accounts have a payable on death designation. Typically, these don't need to be placed in the trust because they will move to the named beneficiary when you pass away. There are exceptions to this. One is if you are using these accounts for your children if you pass away. Life insurance policies and other accounts would need to be entered into the trust so that you have control over when they are distributed.