LIVING TRUST FAQs
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WHAT IS THE DEFINITION OF A LIVING TRUST?
Basically, a Living Trust is a legal instrument (document) that gives control of any property you transfer into the Living Trust to the Trustee (usually you during your lifetime). The Trustee is designated by the Living Trust to control and manage all property that is transferred into the Living Trust.
A Living Trust also has a Successor Trustee(s) who is designated to take over control of any property in the Living Trust upon the demise of the original Trustee. So, say you want to avoid probate to give all your property to your children after your demise, you make yourself Trustee of your Living Trust so that you have control over your property during your lifetime, and make your child(ren) Successor Trustee(s) so that the moment you are gone, the Successor Trustee(s) become(s) the Trustee and hence, have immediate control of your property instead of going through a lengthy and expensive probate process.
WHAT IS THE DIFFERENCE BETWEEN A REVOCABLE TRUST AND IRREVOCABLE TRUST?
The short answer is that the owner of a revocable trust can (relatively) easily transfer assets in and out of the trust for as long as that owner is alive. An irrevocable trust cannot be changed at all by its owner, though as with everything, there are exceptions.
The long answer is that a revocable trust, the most commonly created trust, also known as a Revocable Living Trust, allows its owner to changes any of the terms at any time, including successor trustee(s), beneficiaries, what property is in the trust and what is not. The important thing to remember is to always be sure and update your trust whenever you sell a house, car (if it’s listed in the trust), any jewelry, art work, etc., in short, anything of value that you want to be sure gets transferred to your heirs tax-free, rather than become a “hostage” of probate.
An irrevocable trust is often used by individuals who wish to provide heirs with income during their lifetime while giving it to charity after the demise of the heirs, again created to avoid hefty estate taxes. Irrevocable trust are best explained and addressed in consultation with your attorney due to the complications and many loopholes and various ways and means of creating them.
WHAT HAPPENS TO MY PROPERTY IF I DON’T HAVE A LIVING TRUST
Quite possibly, community property could be managed by your spouse or registered domestic partner, if he or she is mentally competent to do so. However, any property not a part of community property, such as an inheritance or a gift, might not be eligible to be managed by your partner.
If you are deemed incapable of managing your own affairs by a judge, he or she would appoint a conservator to manage your assets for you and report to the court. This individual could be your spouse, registered domestic partner, or another family member, but if none of them are available, the court would name a public guardian.
A conservatorship, the process by which a judge determines who is to manage your affairs, is designed to protect you when you are most vulnerable. It is often costly as well as a slow. Also, the conservatorship is public record, which means that anyone who requests the information at court can view it. It also makes the managing of real estate assets problematic. All of these issues can be avoided by simply creating a living trust, within which all of these issues can be avoided by naming a successor trustee.
I HAVE A LIVING TRUST – DO I STILL NEED A WILL?
For example, if you bought a house just before you passed away and have not yet had the chance to deed it to your Living Trust, the Pour-Over Will allows for the house to be transferred to the trust same as if you’d done it while alive.
If you don’t have a Pour-Over Will, that house that has not yet been transferred to your Living Trust or not in a Joint Tenancy (such as if you own a property with your spouse) will go through probate and be bequeathed to your closest heirs in the manner determined by state law in your state of residence – which is why we provide you with a Pour-Over Will.
WHAT IS A LIVING WILL?
DO I NEED AN ALTERNATE TRUSTEE?
Naming an alternate trustee(s) is a good idea. In the event you should become incapacitated during your lifetime and unable to manage your own affairs, your alternate trustee takes over to manage your financial affairs (this has nothing to do with the Health Care Agent who makes medical decisions for you, though it can be the same person). The main role of an alternate trustee is to use the resources in the funded trust to provide for your financial needs or those of your beneficiaries (such as your minor children). Normally, an alternate trustee is spouse, adult child, close relative, or close friend. When you have no one close to you to trust with this role, you can name your bank.
Your alternate trustee does not have to approach the court to start managing your financial affairs as the trust allows for this individual to simply do so. With no alternate trustee assigned, the court would have to be approached (by your family). The court would in all likelihood appoint a conservator to manage your financial affairs. This can be costly and time consuming. For this reason, we recommend you name an alternate trustee in your trust.
WHO CAN I NAME AS MY HEALTH CARE AGENT?
It’s wise to appoint an alternate agent in the event that the person you named as your primary Health Care Agent is not available when it comes time to make any decisions. Needless to say, you should have the same discussion with this alternate agent that you’ll have with the primary agent.
CAN MY HEALTH CARE PROVIDER BE MY HEALTH CARE AGENT?
DO I HAVE TO DO ANYTHING AFTER MY LIVING TRUST IS CREATED?
1) You can fund the trust during your lifetime and manage your assets, as the initial trustee, from within the living trust. To fund your living trust, you transfer assets into the name of the trust during your lifetime, usually right after the creation of the trust, such as your home, any other house(s) you own, bank accounts, art collection(s), jewelry, or anything of value.
2) Your second option is to create the trust but not fund it, meaning, not transfer anything into it during your lifetime. Upon your demise, all your assets are “automatically” transferred into your trust via your Pour-Over-Will (it’s included in our complete Living Trust Package). Your successor trustee usually handles this duty.[/toggle][toggle name=”WHAT IS A POUR OVER WILL?” open=”false”]A Pour-Over Will is a legal instrument that basically states that all your assets not yet transferred to your Living Trust during your lifetime are to be transferred into it upon your demise.