Creating a living trust provides an effective means through which the probate process is avoided and assets may be protected from a variety of creditors.
In creating a living trust, people commonly think about assets like real estate and investment accounts of different types. Personal property must not be overlooked when it comes to the creation of a living trust. There are a number of factors a person needs to consider when it comes to personal property and living trusts.
Appropriately Identify What Personal Property is Intended to be in the Living Trust
An important consideration in regard to personal property and living trusts is identifying appropriately the items that are intended to be a part of the trust. This does not mean that every single item of personal property intended to be included within a living trust needs specific itemization. With that said, large items of personal property should be uniquely itemized. Smaller items can be identified in a personal property memorandum.
If changes are made regarding specific items of personal property, that amendment must be reflected in the trust agreement itself. In other words, the trust agreement must be kept up to date regarding the personal property that is intended to be part of a living trust.
Do Not Act in Contravention of the Trust
A common mistake a person makes when personal property is included in a living trust is acting in contravention of that trust. This means that a person (or other family members, as often is the case) fails to treat personal property included in the trust as trust property.
A common example of this conflict regarding personal property and living trusts arises when a family member takes possession of personal property included in the trust without regard to the trust agreement and without approval of the trustee. (The trustee is the person responsible for making decisions regarding the trust and its assets.)
When a trust is created, a person cannot legally take possession of property outside of what is permissible within the trust agreement. Similarly, the person who established the trust cannot distribute personal property in the trust in a manner inconsistent with the trust agreement.