Estate planning should be a part of everyone’s financial plan, especially as you grow older. A living trust can serve as the centerpiece of your estate plans, as it helps simplify things for your family when you die. That’s because, unlike a will, a living trust does not have to pass through the probate process, which can be long and complicated. In this article we’ll walk through the basics of creating a living trust in the state of Alabama, though you might also consider consulting with a financial professional or estate planning lawyer.
How to Create a Living Trust in Alabama
This is how you can go about creating a living trust in The Heart of Dixie:
- Figure out whether you want a single or joint trust. If you’re married, it could be a good idea to use a joint trust so that you and your partner can each store property and assets in the same place. A single trust is obviously a better fit for those who are unmarried.
- Pick what property and assets you’d like to store in your living trust. You can choose just about anything you own, from investments and annuities to physical property and land. You should also be sure to gather the relevant ownership paperwork for your assets.
- Decide who you’d like to be your trustee, which is the person who oversees your trust. You can choose yourself as your trustee, in which case you’ll also need to pick a successor who will take over when you die. The trustee ensures that your assets and property are properly distributed according to your wishes.
- Create a trust document with the help of either a lawyer or an online program.
- Sign your living trust in front of a notary.
- Physically fund your trust by adding the relevant assets and property to it. You can do this yourself or with a lawyer, which is recommended.
What Is a Living Trust?
A living trust is a legal document that lets you determine who will take ownership of your assets following your death. The trustee of a living trust is responsible for distributing assets to the listed beneficiaries when this occurs. Many people make themselves the trustee of their own living trust, though if you do this you’ll need to designate a successor who can act on your behalf after your death.
There are two types of living trusts: revocable and irrevocable. An irrevocable living trust is permanent. Even the creator of the trustee cannot take items out of the trust without the express permission of those named in the trust.
A revocable living trust is more malleable. The creator of the trust can modify beneficiaries and add or remove items from the trust at their will. However, the creator of a revocable trust is still liable for the taxes on any items placed in the trust, whereas an irrevocable trust is taxed as its own entity.
How Much Does It Cost to Create a Living Trust in Alabama?
The cost of creating a living trust in Alabama varies significantly depending on the method you choose to use. There are online websites you can use that will cost you no more than a few hundred dollars. Using an attorney, on the other hand, may cost upwards of $1,000. Exact prices obviously depend on the specific attorney or online program you go with.
While you can technically make a living trust on your own, there are certain risks involved with DIY estate planning. There’s a lot of precise research involved, and its easy to overlook important details or get confused. We recommend you work with an estate planning attorney who is a trust specialist.
Why Should You Get a Living Trust in Alabama?
A living trust is great way to ensure that your assets and property are distributed the way that you want after your death. The key perk related to creating a living trust is that it lets your family to avoid the probate process. This can be time-consuming, expensive and convoluted, whereas a living trust is executed without probate.
Alabama is also one of many states that don’t use the Uniform Probate Code, which makes the probate process much more straightforward. For this reason alone, creating a living trust in Alabama may be a particularly smart idea.
Another reason why a living trust might be worthwhile is that it avoids conservatorship if you become incapacitated. This is because you’ll already have a trustee or a successor in place.
It’s also easy to leave property or assets to a minor in a living trust. Through this, you can easily designate that the trustee hold onto certain items or assets until the minor reaches a specific age.
Who Should Get a Living Trust in Alabama?
You don’t need to be wealthy to get a living trust. The benefits of a living trust apply for small estates in Alabama as well, especially since the state doesn’t use the Uniform Probate Code. That being said, Alabama does have a simplified probate process for estates less than $25,000 in size. In these cases, you might not need to bother with a living trust.
Putting together a living trust is often more expensive than formulating a will. Because of this, if your estate plan is fairly simple, a living trust may be more trouble than it’s worth. Still, there are key differences between living trusts and wills.
Living Trusts vs. Wills
If you decide to create a living trust, it’s likely that you’ll still need a will that specifies what to do with property not placed in your living trust. A will can also name an executor, offer instructions as to how to handle taxes and debts, establish guardianship for minors and select managers for children’s property.
|Living Trusts vs. Wills|
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Neither of these documents should be confused with a living will. A living will provides medical instructions for what to do should you become incapacitated.
Living Trusts and Taxes in Alabama
Creating a living trust is highly unlikely to affect your taxes, as Alabama has no estate or inheritance taxes. The federal estate tax still applies, though, if your estate is worth at least $11.4 million.
Creating a living trust in Alabama could be a good idea for certain people, especially since the state does not use the Uniform Probate Code. A living trust can help make the distribution of your property an easier experience for your family and friends after your death. If you decide that a living trust is right for you, make sure it fits into your estate plan. Otherwise, we recommend that you talk to an estate planning attorney.
Tips for Estate Planning
- Estate planning can be complicated, and its often a good idea to work with a financial advisor to make sure that you’re handling things correctly. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
- Don’t make the mistake of waiting until you’re too old to start planning your estate. By implementing an estate plan at a younger age, you’ll be adequately prepared for whatever happens. Make sure you take the time to educate yourself about all aspects of estate planning so that you can make one that works for you.
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