Understanding Living Trusts – Part II

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  1. Is it hard to transfer assets into my trust?
    No, and your attorney, trust officer, financial adviser and insurance agent can help. Typically, you will change titles on real estate, stocks, CDs, bank accounts, investments, insurance and other assets with titles. Most living trusts also include jewelry, clothes, art, furniture, and other assets that do not have titles. Some beneficiary designations (for example, insurance policies) should also be changed to your trust so the court can’t control them if a beneficiary is incapacitated or no longer living when you die. (IRA, 401(k), etc. can be exceptions.)

  1. Doesn’t this take a lot of time?
    It will take sometime — but youcan do it now, or you can pay the courts and attorneys to do it for you later. One of the benefits of a living trust is that all of your assets are brought together under one plan. Don’t delay “funding” your trust; it can only protect assets that have been transferred into it.
  1. Should I consider a corporate trustee?
    You may decide to be the trustee of your trust. However, some people select a corporate trustee (bank or trust company) to act as trustee or co-trustee now, especially if they don’t have the time, ability or desire to manage their trusts, or if one or both spouses are ill. Corporate trustees are experienced investment managers, they are objective and reliable, and their fees are usually very reasonable.
  1. If something happens to me, who has control?
    If you and your spouse are co-trustees, either can act and have instant control if one becomes incapacitated or dies. If something happens to both of you, or if you are the only trustee, the successor trustee you personally selected will step in. If a corporate trustee is already your trustee or co-trustee, they will continue to manage your trust for you.
  1. 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 resume control. When you die, your successor trustee pays your debts, files your tax returns and distributes your assets. All can be done quickly and privately, according to instructions in your trust, without court interference.
  1. 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 to act.
  1. 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.
  1. How can a 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.
  1. Doesn’t a trust in 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 at incapacity.
  1. Is a living trust expensive?
    Not when compared to all of the costs of court interference at incapacity and death. How much youpay will depend primarily on your goals and what you want to accomplish.
  1. How long does it take to get a living trust?
    It should only take a few weeks to prepare the legal documents after you make the basic decisions.
  1. Should I have an attorney do my trust?
    Yes, but you need the rightattorney. A local attorney who has considerable experience in living trusts and estate planning will be able to give you valuable guidance and peace of mind that your trust is prepared and funded properly.
  1. 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.
  1. Is a “living will” the same as a living trust?
    No. A living trust is for financialaffairs. A living will is for medicalaffairs; it lets others know how you feel about life support in terminal situations.
  1. Are living trusts new?
    No, they’ve been used successfully for hundreds of years.
  1. 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 youwon’t have to deal with the courts at theirincapacity or death.
  1. Summary of Living Trust Benefits
  • Avoids probate at death, including multiple probates if you own property in other states
  • Prevents court control of assets at incapacity
  • Brings all of your assets together under oneplan
  • Provides maximum privacy
  • Quicker distribution of assets to beneficiaries
  • Assets can remain in trust until youwant beneficiaries to inherit
  • Can reduce or eliminate estate taxes
  • Inexpensive, easy to set up and maintain
  • Can be changed or cancelled at any time
  • Difficult to contest
  • Prevents court control of minors’ inheritances
  • Can protect dependents with special needs
  • Prevents unintentional disinheriting and other problems of joint ownership
  • Professional management with corporate trustee
  • Peace of mind

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