Living Trusts

Understanding Living Trusts A will may not be the best plan for you and your family. A will must go through a probate court before assets can pass to your heirs. Probate can be a costly and lengthy process. A will only goes into effect after you die. So, it provides no protection if you become physically or mentally incapacitated – an increasingly common issue because of longer lifespans. A court could easily take control of your assets before you die — a concern of millions of older Americans and their families. Fortunately, there is a simple and proven alternative to a will — the revocable living trust. It avoids probate and lets you keep control of your assets while you are living — even if you become incapacitated.
What is a Living Trust? A living trust is a legal document that, just like a will, contains your instructions for what you want to happen to your assets when you die. Unlike a will, a living trust can avoid probate at death, control all of your assets, and provide for court-free management of your assets if you become incapacitated.
Who should have a Living Trust? Age, marital status, and wealth don’t really matter. If you own titled assets and want your loved ones (spouse, children, or parents) to avoid court interference at your death or incapacity, you should probably have a living trust. You may also want to encourage other family members to have one so you won’t have to deal with the courts at their incapacity or death.
Do I lose control of the assets in my Trust? Absolutely not. You keep full control. As trustee of your trust, you can do anything you could do before — buy and sell assets, change or even cancel your trust. That’s why it’s called a revocable living trust. You even file the same tax returns. Nothing changes but the names on the titles.
Does my Trust end when I die? Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age(s) you want them to inherit. Your trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, spouses and future death taxes.
How can Living Trust save on Estate Taxes? Your estate will have to pay federal estate taxes if its net value when you die is more than the “exempt” amount at that time. (Your state may also have its own death or inheritance tax.) If you are married, your living trust can include a provision that will let you and your spouse use both of your exemptions, saving a substantial amount of money for your loved ones.
Does Joint Ownership avoid probate? Not really. Using joint ownership usually just postpones probate. With most jointly owned assets, when one owner dies, full ownership transfers to the surviving owner without probate. But if that owner dies without adding a new joint owner, or if both owners die at the same time, the asset must be probated before it can go to the heirs. Watch out for other problems. When you add a co-owner, you lose control. Your chances of being named in a lawsuit and of losing the asset to a creditor are increased. There could be gift and/or income tax problems. And since a will does not control most jointly owned assets, you could disinherit your family. With some assets, especially real estate, all owners must sign to sell or refinance. So if a co-owner becomes incapacitated, you could find yourself with a new “co-owner” — the court — even if the incapacitated owner is your spouse.
  • Summary of Living Trust Benefits

  • Avoids probate at death, including multiple probates if you own property in other states
  • Provides for court-free control of assets at incapacity
  • Brings all of your assets together under one plan
  • Provides maximum privacy
  • Quicker distribution of assets to beneficiaries
  • Assets can remain in trust until you want beneficiaries to inherit
  • Can reduce or eliminate estate taxes
  • inexpensive, easy to set up, and maintain
  • Can be changed or canceled at any time
  • Difficult to contest
  • Provides for court-free control of minors’ inheritances
  • Can protect dependents with special needs
  • Prevents unintentional disinheriting and other problems of joint ownership
  • Professional management with a corporate trustee
  • Peace of mind

Probate

  • What is Probate? Probate is the legal process through which a court “wraps up” your affairs. When you die, a probate court will:
  • -Determine whether you left a valid will,
  • -Ensure your debts are paid,
  • -Ensure that all taxes are paid, and
  • -Ensure your assets are distributed according to your will. If you don't have a valid will, your assets are distributed according to state law.
What's so bad about Probate? It can be expensive. Legal fees, executor fees, and other costs must be paid before your assets can be distributed to your heirs. If you own property in several states, your family could end up paying for multiple probates – one in each state. Costs vary widely, but many can be minimized with effective planning. It takes time. Probate can be finished in a few months in some circumstances, but often takes longer. During part of this time, assets could be frozen so an accurate inventory can be taken. Nothing can be distributed or sold without court and/or executor approval. If your family needs money to live on, they must request a living allowance, which may be denied and may be less than your family is accustomed to. Your family has no privacy. Probate is a public process, so any “interested party” can see what you owned, whom you owed, who will receive your assets, and when they will receive them. The process “invites” disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors. Your family has no control. The probate process determines how much it will cost, how long it will take, and what information is made public.

Successor Trustees

Who can be Successor Trustees? Successor trustees can be individuals (adult children, other relatives, or trusted friends) and/or a corporate trustee. If you choose an individual, you should also name some additional successors in case your first choice is unable or unwilling to act.
What does a Successor Trustee do? If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you can resume control. When you die, your successor trustee pays your debts, files any required tax returns, and distributes your assets. All can be done quickly and privately, according to instructions in your trust, without court interference.
Does a Successor Trustee have to be a U.S. Citizen? Yes. But a non-U.S. citizen can be a co-trustee with a U.S. Citizen.

Living Trust and Wills

Doesn't a Trust and a Will do the same thing? Not quite. A will can contain wording to create a testamentary trust to save estate taxes, care for minors, etc. But, because it’s part of your will, this trust cannot go into effect until after you die and the will is probated. So it does not avoid probate and provides no protection for you at incapacity.
If I have a Living Trust, do I still need a Will? Yes, you need a “pour-over” will that acts as a safety net if you forget to transfer an asset to your trust. When you die, the will “catches” the forgotten asset and sends it into your trust. The asset may have to go through probate first, but it can then be distributed as part of your overall living trust plan. Also, if you have minor children, a guardian will need to be named in the will.
Is a "Living Will" the same as a Living Trust? No. A living trust is for financial affairs. A living will is for medical affairs; it lets others know how you feel about life support in terminal situations.

What is included in the single person estate plan package?

  • Interview, Documents Review and Analysis Preparation of Living Trust by an Attorney
  • Preparation of Pour-Over Will by an Attorney
  • Durable Power of Attorney for Asset Management
  • Advance Health Care Directive
  • Preparation of One Trust Transfer Deed-owner occupied
  • Preparation of One Change of Ownership Report (PCOR)
  • Memorandum of Trust Bookkeeping,
  • Homeowners Insurance Transmittal Letter,
  • Transmittal Letter Form(s),
  • Certification of Trust,
  • Checklist of Changes Requiring Review of Estate Plan, and
  • Guidelines for Successor Trustee.

What is included in a married couple estate plan?

  • Interview, Documents Review and Analysis Preparation of Living Trust by an Attorney
  • Preparation of Pour-Over Will for Husband,
  • Preparation of Pour-Over Will of Wife,
  • Advance Health Care Directives for Husband,
  • Advance Health Care Directives for Wife,
  • Durable Powers of Attorney for Asset Management for Husband,
  • Durable Power of Attorney for Asset Management for Wife,
  • Disclosure Letter,
  • Memorandum Regarding Community Property,
  • Memorandum of Trust Bookkeeping,
  • Homeowners Insurance Transmittal Letter,
  • Transmittal Letter Forms,
  • Certification of Trust,
  • Checklist of Changes Requiring Review of Estate Plan,
  • Guidelines for Successor Trustee,
  • One Trust Transfer Deed on your property, and
  • One Change in Ownership Report (PCOR).

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