Revocable Living Trusts

Not everyone needs a living trust. However, if you have a significant estate, minor children, or a second marriage you should consider setting up a living trust. With a living trust you will typically find the following benefits. First, if you become incapacitated your successor trustee may manage your trust assets for your benefit without the necessity of a court conservatorship. Second, trust assets will avoid probate, thereby saving probate costs, and avoiding delays and publicity upon your death. Third, your trust may be structured such that the Federal Estate Tax is reduced or even eliminated. Fourth, after your death the trust may provide continuing asset management for your minor children.

Yes. A trust is a legal entity separate from its creator (the Settlor), separate from its Trustee, and separate from its Beneficiaries. This separateness exists despite the fact that you may be the settlor, the trustee and the beneficiary. In each of these roles, however, you act in a different and distinct capacity, and the Trust remains a separate legal entity. During your lifetime you will administer the trust property for your own benefit, just as you did before you created the trust. When you die the Successor Trustee will distribute the trust property to the beneficiaries set forth in your trust declaration. A living trust is effective as soon as you sign the trust document and place assets into the trust. By contrast, a Will has no legal effect until you die.

As a separate entity the Trust simply continues on according to the instructions you have set out. The successor trustee retains or distributes all your trust property, as specified in your trust declaration. The Trust serves as a letter of instruction to the successor trustee who takes over after you. On your death the successor trustee may transfer your trust property very easily and quickly to those trust beneficiaries identified in the trust document. Trust assets are not subject to court supervised probate proceedings.

Most assets may be transferred to the trust, such as bank accounts, brokerage accounts, your residence and other real property, and items of personal property. Trusts may not own certain assets, such as IRA accounts and 401K accounts. Transferring assets to the trust is known as “funding” the trust.

No. If your living trust is revocable and you are the trustee the trust does not need a separate taxpaying identification number. Rather you report all income and deductions on your own tax return just as you did before you established the trust.

Yes. If an asset is not held in the name of the Trust, the Trust provisions have no effect on such asset. If these non-trust assets do not pass by some other means such as beneficiary designation or joint tenancy your Will governs the disposition of such assets. Because a living trust is normally the centerpiece of a decedent’s estate plan, most people should have a “pour-over” Will in which assets subject to the Will are distributed to the living trust on the decedent’s death.