Why A Certificate of Trust Is Necessary In Estate Planning

 Posted on November 29, 2022 in Estate Planning

 Implementing a Trust into your estate has many advantages. Along with being a less costly alternative than going through Probate and being more time-efficient, A Trust has the added benefit of being private. However, when a Trust has been implemented, you need to provide documentation of the Trust when opening new accounts or purchasing real estate. That is where a Certificate of Trust comes in handy.

Privacy of a Trust

While a Will must go through Probate and will become a public document, a Trust Agreement has the benefit of remaining private, meaning that only those that have seen the Trust know the contents of it. Mainly, the people who are aware of the contents of the Trust are the Trustees and Successor Trustees.

Role of Trustees

The Trustee has the power to manage the Trust. Typically, while the Trustor (the person who created the trust) is alive, they will serve as Trustee. Doing so gives the Trustee full ability to add assets to the trust, make payments on behalf of the trust, and remove items from the trust as necessary to benefit the Trustor during their lifetime.

 In the Trust, the Trustor will account for who they wish to serve as Successor Trustee after the Trustor (also the initial Trustee) pass away. The Successor Trustee will know the details of the Trust because they will be in charge of managing the Trust and making distributions as laid out within the Trust.

Funding the Trust Upon Execution

Once the Trust is created and signed by the Trustor, there is the next step of funding the Trust. The goal of a Trust is to avoid probate, which can only be achieved if the assets that are currently in the Trustor’s name are transferred into the Trust’s name. This is what is meant by funding the Trust. Some common assets that need to be transferred to the Trust include any real estate, vehicles, boats, bank accounts, and savings accounts. These assets are renamed completely, meaning that they will no longer be owned by the Trustor as in individual, but will be owned by the Trust that was created by the Trustor. In addition, the Trustor also needs to change their beneficiaries on certain policies. Some assets, such as life insurance, cannot be retitled into the Trust’s name because they must be owned by an individual. To abide by the law while still operating to fund the trust and avoid probate, the Trustor should rename the beneficiaries of the life insurance policies so that the primary beneficiary is the Trust. By doing so, the life insurance proceeds will transfer to the Trust immediately upon the death of the Trustor, avoiding probate.

The second thing to keep in mind is that, in order to keep the Trust effective, any purchases in the future must be made in the Trust’s name. What this means is that, if the Trustor purchases a new home, vehicle, or opens a new bank account, these assets must be titled in the Trust’s name at the time of purchase. This way there will be no issue at the time of death wondering if anything was missed, which would then mean the estate would need to go through Probate.

The downfall of retitling assets into the Trust’s name and purchasing new accounts under the Trust’s name is that the Trustor must provide documentation that the Trust exists and show that the Trustor has authority to add these assets to the Trust. This would mean having to show the intimacies of the Trust to people who otherwise have no reason to know about them, thereby eliminating the privacy aspect of the Trust. Luckily, the creation of a Certificate of Trust will protect that privacy.

Certificate of Trust Attorney in Oswego and Plainfield, Illinois

By creating a Certificate of Trust along with a Trust agreement, the Trustor will have a document that is sufficient for retitling assets while still protecting the privacy of the intricacies within the Trust itself. A Certificate of Trust lays out the essential information needed to prove that the trust exists and that the Trustee has authority to act in the way he is attempting to. The Certificate of Trust includes the name of the Trust and its date of execution, along with the name of the Trustor, Trustee, and Successor Trustees. The document also includes the basic powers of the Trustee, who has authority to amend and/or revoke the Trust, and how to name the Trust when retitling assets.

 A Certificate of Trust includes only the information necessary to retitle assets and purchase additional assets in the Trust’s name. by having the Certificate of Trust instead of the entire Trust Agreement, you can ensure that you will be able to properly fund the trust and avoid Probate at your death, while also keeping your last wishes private and out of the public eye.

Naperville and Yorkville Estate Planning and Asset Protection Attorneys

Peace of Mind Asset Protection, LLC is a boutique law firm specializing in estate planning and asset protection. We service clients in Kendall County, Will County, Kane County, DuPage County, and neighboring counties. We understand that planning for future events can be a difficult time, and we are here to make the process as smooth as possible. We offer free initial consultations and are available for in-person visits, Zoom visits, and in-home visits if necessary. To inquire more about our services and the benefits of implementing a trust into your estate plan, give us a call at 630-882-2467.