Hello everyone, it’s great to be back, I´ve been away for too long and now am already again to share with you some ideas and try to provide you as much information as possible for your everyday in Costa Rica, during the following issues, we will be explaining what living trusts are and the benefits that they will bring to you and your family upon inevitable events.
A living trust–an inter vivos trust if you want to be formal–allows you to put your assets in a trust while you’re still alive. If your living trust is revocable, as almost all are, it gives you great flexibility. Someone in whom you have confidence manages the property, usually for the benefit of you or your family. Some people name themselves as trustees, and find there is no difference between managing the trust and managing their own property–they have the right to buy, sell, or give property as before, though the property is in the trust’s name rather than their own. A living trust is one of the two main ways to avoid probate. (The other is incorporating all your assets and in case of bank accounts naming beneficiaries directly at the bank) One of the purposes of probate is to determine the disposition of the property you leave at death. Since the trustee of your living trust owns that property, there is no need for probate. Living trusts have become extremely popular in recent years. Even though they’re a useful, simple, and relatively inexpensive way to plan your estate, they do not magically solve all your problems.
Deciding whether a living trust is right for you depends on the size of your estate, what kinds of assets it contains, and what plans you have for yourself and your family.
How they work
Requirements for setting up a living trust are simple. In general, you execute a document saying that you’re creating a trust to hold property for the benefit of yourself and your family, or whomever you want it to benefit. Some trust declarations list the major assets (home, investments) that you’re putting in trust; others refer to another document (a schedule) in which you list the exact property that will begin the trust; or you may simply transfer the property to the trustee under the trust agreement. In any case, you can add and subtract property whenever you want. You must change the ownership registration on whatever property you put into the trust–deeds, brokerage accounts, bank accounts, etc.–from your own name to the name of the trust (e.g. The John A. Smith Trust).
When you put property into a living trust, the trust becomes its owner, which is why you must transfer title to the property from your own name to that of the trust. But you retain the right to use and enjoy the property.
You can make anyone you want the trustee. You can also name an alternative trustee (sometimes known as successor trustee) to take over in the event of the original trustee’s death or incapacity. We often recommend to allow a corporation to be the trustee to avoid such situations.
In a revocable living trust, you keep the right to manage your property whether you’re the trustee or not, since you have a right to change the terms of the trust, the trustee, and the property in the trust at any time. When you die, your trustee distributes the property per the terms of the trust. Usually, your trustee is a corporate entity or trust company if you are willing to pay their fees.
Living trusts can extend long after you die. If you want the trust to benefit your infant grandchildren, for example, you might specify that the trustee make gifts to them as needed until they are fully grown. Living trusts, like wills, give you wide flexibility in distributing your property. For example, the trust agreement could say “at my death, my trustee is to give my car to my son Cain, my coat to my son Jacob” and so on. Your instructions can tell the trustee to continue managing assets for the benefit of someone else, distribute them to any beneficiaries you choose, or perform some combination of these actions. If beneficiaries of your living trust die before you do, the property reverts to you, unless you’ve named other people (contingent beneficiaries) for those gifts.
In our next editions, we will continue to provide you more information about this procedure so you can make an educated decision on this matter. You can always give us a call if you have questions or just to start and create a revocable trust agreement for you.