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Can a Paralegal Prepare a Living Trust?

can paralegal prepare living trust

Most paralegals are not licensed to practice law independently; as such, they must work under the guidance of a qualified legal professional. Only a paralegal registered as a Legal Document Assistant (LDA) can prepare a living trust for clients without the supervision of a lawyer. However, it is essential to note that, even though LDAs can prepare documents, they are still prohibited from providing legal advice or representation in court.

Importance of Having a Living Trust

A living trust is a legal instrument that enables an individual, known as the settlor, to transfer their assets into a trust during their lifetime. The trustee manages the assets of all beneficiaries, as outlined in the trust agreement. The primary purpose of a living trust is to facilitate efficient management of assets, circumventing the probate process, and preserving privacy.

Living trusts offer several advantages, including the avoidance of probate, which can be a lengthy process. Furthermore, trusts provide greater privacy, as trust documents are not subject to public records like wills. Living trusts also enable the practical management of assets in the event of the settlor’s incapacity, help minimize estate taxes, eliminate the need to hire a probate lawyer, and provide creditor protection for beneficiaries.

Choosing the Right Type of Living Trust

When selecting the appropriate type of living trust, consider factors such as control, asset protection, tax implications, and the specific needs of the settlor. Support from an experienced Legal Document Assistant is recommended to ensure a living trust aligns with the settlor’s objectives.

Revocable Living Trust

A revocable living trust is a flexible arrangement that allows the settlor to maintain control over their assets during their lifetime. The settlor may modify or revoke the trust at any time. Upon the settlor’s death, a successor trustee assumes the management of trust assets according to the trust agreement.

Irrevocable Living Trust

An irrevocable living trust involves permanently transferring assets to the trust and relinquishing the settlor’s control over those assets. Once established, an irrevocable trust generally cannot be amended or canceled. Irrevocable trusts offer increased asset protection and tax benefits but at the expense of the settlor’s ability to make changes.

Key Components of a Living Trust

1. Declaration of Trust

This section officially establishes the names of the settlor and the trustee(s). It also provides basic information about the purpose of the trust and outlines the responsibilities of the trustee(s).

2. Trust Assets

A detailed list of all assets being transferred into the trust should be included in this section. This may include real estate, bank accounts, investment portfolios, personal property, etc. Each asset should be clearly described, and its value should be provided.

3. Trust Beneficiaries

The beneficiaries are the individuals who will receive the benefits from the trust. This section should identify each beneficiary, their relationship to the settlor, and any instructions regarding the distribution of trust assets.

4. Distribution Provisions

These provisions outline how the trust assets will be distributed to the beneficiaries. The distribution can occur in several ways, such as outright distributions, periodic payments, or distributions based on certain conditions.

5. Trustee Powers and Duties

This section provides a comprehensive list of the trustee’s duties, including managing trust assets, distributing income, filing tax returns, and other responsibilities necessary for properly administrating the trust.

6. Successor Trustee

It is vital to name a successor trustee who will assume the role of trustee in case the original trustee cannot serve. This section should specify the process for appointing a successor trustee and any guidelines for their selection.

7. Trust Termination

This section outlines the conditions under which the trust will terminate. Common reasons for termination include the death of the settlor, the distribution of all trust assets, or the occurrence of a specified event.

8. Governing Law

The trust document should specify the jurisdiction whose laws will govern the administration of the trust. This section ensures that the trust will be subject to the legal framework of the chosen territory.

9. Signatures

Finally, the trust document must be signed by the settlor, the trustee(s), and any required witnesses. This validates the document and makes it legally enforceable.

Funding the Living Trust

Adequately funding the trust is paramount to ensure its effectiveness. To fund a living trust, the settlor must transfer the designated assets into the trust’s name. This process involves retitling assets, such as deeds.

Retitling assets entails changing the ownership of the assets from the settlor’s name to the name of the trust. This process varies depending on the type of asset; for example, real estate requires recording a new deed, while financial accounts necessitate contacting the financial institution to update ownership records.

While funding a living trust, it is essential to be aware of potential tax implications, such as capital gains taxes. Additionally, the settlor should consider the impact of the trust on their overall estate plan, including the coordination of beneficiary designations and the potential need for additional documents, such as a pour-over will.

Getting a Will After Setting Up a Living Trust

A living trust might only cover some of your assets. There are some situations when making a will without an attorney can still be beneficial. Here are a few reasons why you might still want to have a will even if you have a living trust:

Distribution of non-trust assets: A living trust only covers the assets explicitly transferred into the trust. A will can provide instructions for distributing any assets that are not part of the trust.

Appointing guardians for minor children: If you have minor children, you can use a will to nominate a guardian to take care of them in the event of your death. A living trust typically does not cover this aspect.

Specifying funeral arrangements: A will can provide instructions for your funeral arrangements, while a living trust typically does not cover these matters.

Handling debts: A will can provide instructions on how to manage your outstanding debts, taxes, and other expenses after your death. Although a living trust can help with some of these matters, a will can provide more detailed instructions.

Final Thoughts

In conclusion, a living trust is a valuable estate planning tool that can streamline the management of assets, avoid the probate process, and maintain privacy for the beneficiaries. When selecting the appropriate type of living trust, consider factors such as control, asset protection, tax implications, and the specific needs of the settlor.

Even with a living trust in place, it may still be beneficial to have a will to address non-trust assets, appoint guardians for minor children, specify funeral arrangements, and handle debts. A comprehensive estate plan that includes both can ensure that the settlor’s wishes are honored in the most effective manner possible.