Trusts

What is a revocable living trust?

A trust, like a corporation, is an entity that exists only on paper but is legally capable of owning property. A flesh and blood person, however, must actually be in charge of the property; that person is called the trustee. You can be the trustee of your own living trust, keeping full control over all property legally owned by the trust. Upon your death or disability, a “successor trustee” chosen by you — usually a spouse, child or other family member — can take over for you as trustee.

There are many kinds of trusts. A “Revocable Living Trust” is simply a trust you create while you’re alive, rather than one that is created at your death under the terms of your will. You can change or revoke it at any time during your lifetime. However, depending on the terms of the trust, portions of a joint revocable living trust created by a husband and wife may become irrevocable upon the death of either spouse.

All living trusts are designed to avoid probate. Rather than going through the court process, the successor trustee, the person you appointed to handle the trust after your death, simply transfers ownership to the beneficiaries you named in the trust. Some trusts, such as A B trusts, also help you reduce estate taxes, and others let you set up long term property management, such as providing for a disabled heir or assisting with a grandchild’s education.

If I have a revocable living trust, do I still need a will?

Yes. You’ll need a “Pour Over Will,” which automatically “pours over” into your trust any assets you neglected to place in your trust before your death. These forgotten assets may have to go through probate, but will then go directly into your living trust and be distributed under the terms of the trust.

Is a living trust document made public, like a will?

No. A will becomes a matter of public record when it is submitted to the probate court, as do all the other documents associated with probate — inventories of the deceased person’s assets and debts, for example. The terms of a living trust, however, do not generally become public.

When will I need to update my living trust?

It’s a good idea to review your living trust, and all your other estate planning documents, at least once a year. As a general rule, you should change your trust at any time it’s no longer what you want. Any major changes in your family, such as marriage, divorce, death, birth, etc., could justify a change in your trust. If the person you’ve named as your successor trustee can no longer fulfill the responsibility, you should make changes accordingly. You retain the power to make changes at any time to your revocable living trust by simply amending your trust.

What is a corporate trustee? When should I consider a corporate trustee?

A corporate trustee is a bank trust department or a trust company that specializes in managing trusts. They can manage your trust for you now, if you become disabled, and/or after you die according to your instructions — they can buy and sell assets, handle required paperwork, maintain accurate records, and distribute income and assets as your trust directs. Sometimes family and friends are not always a good choice to be involved with your trust. Or, you may have no one you can trust to take care of your financial affairs for you. Under such circumstances, a corporate trustee may be appropriate.

How do I fund my trust?

You place your assets into your trust by changing the name on all of your titled assets, i.e., real estate, savings accounts, money markets, stocks, bonds, mutual funds, CDs, annuities, and life insurance, into the name of your living trust. This is a very important step that must be done correctly to truly avoid probate. An experienced attorney can assist you with this important step.

Can a living trust avoid a conservatorship?

Yes. Many of us have a well grounded fear that we may someday become seriously ill and unable to handle our own affairs. If you ever become incapacitated, the probate court may appoint a conservator to manage your property. Your Estate would be required to pay attorneys’ fees (a conservatorship generally requires two lawyers) and court costs — including the cost of a relatively expensive annual insurance bond. With a living trust, your successor trustee can manage your property if you’re unable to handle your affairs — all without court fees or court involvement.

What is meant by an A B Trust?

An A B trust is a trust for married couples designed to reduce estate taxes. In this calendar year, the first $3,500,000 of every person’s estate (including lifetime gifts exceeding the annual $13,000 exclusion) is exempt from federal estate taxes. This is known as the Unified Credit Exemption Against Gift and Estate Taxes. An A-B trust allows the couple to take advantage of both of their exemptions — resulting in a “doubling effect” from $3,500,000 to $7,000,000 — upon the second spouse’s death. As a result, an A-B Trust can save hundreds of thousands of dollars in estate taxes, money that will be passed on to your family or other beneficiaries. Sometimes, a modified A-B Trust, known as a Disclaimer Trust, is appropriate. Without this special type of estate planning, one of the exemptions will usually be lost.

Wills and Trusts Lawyer – Tucson and Green Valley