After working so hard to build and manage your wealth, you’re not about to let it just scatter to your heirs without a plan. You want to steer it to them intact, which may include creating a living trust to avoid probate in Idaho. This article will help you decide whether a living trust makes sense for you and everything else you want to know about the legal document. For large estates, you’ll probably also want a financial advisor’s help. SmartAsset’s free matching tool can help you find the right pro for your situation.
How to Create a Living Trust in Idaho
Setting up a living trust, sometimes called a loving trust or family trust, is largely the same regardless of where you live in the U.S. Here are the basic six steps:
1. Identify what will go into the trust. Some assets can’t, such as 401(k) plans and IRAs. Other things like bank and brokerage accounts and life insurance policies can but don’t need to, as long as you designate your beneficiaries on the accounts or policies so that they are payable or transferred on death. Most likely, it’s real property and business interests that you want to protect with a living trust. (But as long as you are setting up the trust, you may decide to put everything you can in it.)
2. Choose the appropriate type of living trust. You probably want it to be revocable (as opposed to irrevocable), so that you maintain control of the assets and have the flexibility to remove them or cancel the whole trust if you change your mind. If you are married (and it’s to the only spouse you have children with), you likely want to create a joint living trust, which is easier to administer than two single trusts after one of you dies. If you’re in a later marriage with children from previous relationships, you probably want to go with two single trusts.
3. Next choose your trustee, who will manage the trust. With revocable trusts, it can be you, or in the case of a joint trust, you and your spouse can be co-trustees. If you name yourself, you’ll also need to choose a successor trustee for when you die. (With irrevocable trusts, the trustee must be someone other than you.)
4. Now create a trust agreement. You’re probably safest hiring an attorney to do this for you. But if you want to do this as cheaply as possible, you can use an online program.
5. Then sign the trust document in front of a notary public.
6. Finally, fund the trust by retitling assets in its name. The trust will not take effect until deeds and titles are transferred to the trust. (For things that can’t be titled, like heirlooms or art, it’s enough just to list them in the trust agreement.) Again, you can do the paperwork yourself, though using a lawyer will ensure you do it properly.
What Is a Living Trust?
Like a will, a living trust is a legal document that assigns where property is to go when the owner – or trust grantor – dies. Unlike a will, a living trust is also an entity that holds the property while the grantor is alive. The main aim of a living trust is to avoid probate, a lengthy court process during which assets are frozen.
The person who manages the trust is the trustee. As stated earlier, the trustee can be the grantor if it’s a revocable trust – or it can be an adult child, other relative, lawyer, anyone you trust. When the grantor dies, the trustee or successor trustee will distribute assets as the grantor instructed.
As explained earlier, there are revocable and irrevocable living trusts. The former is commonly preferred because the grantor does not give up ownership rights. On the other hand, grantors of irrevocable trusts do give up all claim to control and ownership – and as a result, are off the hook for taxes.
How Much Does It Cost to Create a Living Trust in Idaho?
The biggest expense is the lawyer’s fee, which can be on an hourly or project basis. Generally, it can cost three or more times than making a will.
Alternately, you could create the trust yourself, though it’s not advisable. Some online forms are free while others run a few hundred dollars.
The other expenses are the costs associated with retitling assets, which can include transfer taxes, deed preparation fees and county recording fees.
Why Get a Living Trust in Idaho?
The primary reason for creating a living trust in Idaho – or anywhere – is to avoid probate, the court process for authenticating and administering a will. Idaho is one of the states in the country to enact the Uniform Probate Code (UPC), so with no disputes, what’s called “informal probate” requires no court hearing and generally takes six to eight months. (Creditors must be given at least four months to submit any claims on the estate.)
This is actually not a long time compared to states that have not adopted the Uniform Probate Code. Still, bank accounts are frozen during probate, which can complicate matters if heirs can’t pay bills related to the estate. And if there is a court hearing because, say, the will is contested, lawyer and court fees can add up.
A living trust, then, would enable your heirs to skip these delays and costs (which can be even more if you own property in other states, especially ones that have not adopted the UPC). Another benefit of trusts is that you can use them to provide for minors and for heirs with special needs. Trusts, unlike wills, also allow for a postponed distribution of assets (the trustee will just manage them until instructed goals are reached).
Who Should Get a Living Trust in Idaho?
If your primary reason for getting a living trust is to avoid probate, you will not need one if your estate is worth $100,000 or less. At that level, there is a simplified process for small estates that doesn’t involve probate or even informal probate.
If your estate is worth more than $100,000, you may still not need a living trust if there will be no disputes or challenges to your will – so that informal probate procedures will be followed.
But you may want to set up a living trust if you own property in other states that do not have a streamlined probate process. You may also want one if you expect your will to be contested (perhaps you are disinheriting a child or leaving more to one than the other). Other reasons for getting a living trust include, as noted earlier, wanting to provide for someone with special needs or wanting to postpone disbursement of your assets until, say, a child reaches a certain age.
As for irrevocable trusts, these only make sense for very wealthy people looking to minimize estate taxes (which kick in at the federal level at $11.4 million for individuals and $22.8 million for married couples filing jointly).
Living Trusts vs. Wills
Wills are always advisable, regardless of living trusts. That’s because a will can cover what was left out of the trust either by choice or accident. It can also leave instructions such as:
- Forbidding your heirs from selling or giving away certain property
- Stating your preference for guardians of children who are minors
- Forgiving loans you’ve made, say, to a sibling
This chart compares living trusts and wills to help you understand the capabilities of both estate planning tools:
|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|
Living Trusts and Taxes in Idaho
Unless your estate is eight figures or more, a revocable living trust will also not affect federal estate taxes, since the exemption is $11.4 million for individuals and $22.8 million for couples).
The Bottom Line
Since Idaho has adopted the Uniform Probate Code, the enacting of a will may not take as long as it does in other states. You likely don’t need a living trust if your estate is worth $100,000 or less. That’s also the case if no one will contest your will. A living trust may make sense, though, if you want to leave your estate to someone with special needs.
Estate Planning Tips
- Don’t go it alone. A financial advisor can help you with tax planning and wealth transfers as well as investing assets to provide income. To find an advisor near you, use SmartAsset’s free pro matching tool. In about five minutes, it will recommend up to three suitable advisors, based on your financial situation.
- Designate your beneficiaries. As tedious as filling out the forms can be, it is well worth the trouble. Pensions, life insurance policies, retirement accounts and brokerage accounts can all be easily transferred if you designate your beneficiaries. Then keep these designations updated, especially if you subsequently have children or get divorced.
Photo Credit: © iStock/TatyanaGl, © iStock/suesmith2