Once you create your Living Trust Documents, you are not done. There are several supporting documents that must be drafted and signed along with the trust agreement. Each one of these documents plays an important role depending on the facts and circumstances of the trust Grantor and his or her life. In part one of this series, we discussed the Pour Over Will. This article discusses the Declaration of Trust Property and Power of Attorney.
* Declaration of Trust Property. This document has its origins in trust common law and serves two purposes;
1. It is the initial act of funding the trust by the Grantor. A trust is not valid until it is signed and funded with property. This document, signed under oath in front of a notary, declares that all property owned by the Grantor is transferred to the trust thereby funding it.
2. Its second purpose is to declare that the Grantor in conjunction with a provision in the trust agreement allows the trustee to keep property in his or her own name or the name of a nominee. The key to this provision is if the Grantor fails to change title to an asset, the trustee has the authority to do so. This is important if the Grantor is incapacitated or upon the death of the Grantor because it could potentially avoid an expensive probate.
* Power of Attorney. The power of attorney acts as a safety net to allow the attorney in fact to transact business on the assets of the Grantor. The significance to this is if the Grantor becomes incapacitated the attorney in fact can complete property transfers to the trust and avoid a potential probate when the Grantor dies. Our law firm uses a Limited Power of Attorney form only authorizing the attorney in fact to transfer assets to the trust to avoid any potential misuse or abuse.
If you are drafting your own Living Trust Documents, do not forget to include the Declaration of Trust Property and Limited Power of Attorney.
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