1. What is a trust?
A trust is a contract between you, the grantor, and the trustee.
The trustee manages the property put into the trust. Unlike a will,
your trust can become effective as soon as it is set up, not just
at death, and you can be the trustee.
2. What is a Revocable Living Trust (RLT)?
An RLT is a revocable trust set up during your lifetime. As grantor,
you can register or title your property to your RLT. You can chang
ethe trust at any time during your lifetime, so you continue to
have maximum control and flexibility over your estate plan during
your lifetime.
3. Who should be Trustee of my RLT?
The trustee is the manager of your trust. You can be trustee. Your
spouse or an adult child may be named co-trustee or successor trustee.
If your estate is large or complex, you can select a corporate trustee
(such as a trust company) as trustee or successor trustee, especially
if others in your family do not have the time, ability, or desire
to manage the trust.
4. How is an RLT different from a will?
The trust is set up while you are living and a will is effective
only at death. Property in the RLT can be managed by your backup
trustee if you become incapacitated. At death your trust estate
does not pass through the court supervised probate system.
This means your family will save expenses that go along with probate
such as: executors fees, surety premiums, probate tax, commissioner's
fees or court costs. The probate process also takes time. It may
take a year or more for your property to be fully distributed to
your heirs or beneficiaries. Your trustee, however, can often begin
distributing the property promptly after your death, depending on
your directions.
In addition the RLT is private. What you own and to whom you leave
it should never be made public, even after your death. Your will,
on the other hand, and any actions taken during probate proceedings
are recorded with the court for anyone, including neighbors, creditors,
or salesmen, to see.
5. If I have an RLT, do I still need a will?
Yes, but usually only a simple "pour over" will. A will
is also used to name a guardian for minor children. If you die without
putting all of your property into the trust, the will is used to
"pour over" any property that you have left out of your
trust into the privacy of your RLT. A will and your trust may also
work together to protect certain assets if your spouse is in a nursing
home at your death using a testamentary special needs trust
under your will.
6. Are there other advantages to an RLT?
Yes. IN the RLT document you name a successor trustee or trustees
to manage your affairs if you are not able to do so. This person
takes over immediately if you become disabled, incompetent or die.
Court approval is not necessary and there is no need for a court
to appoint a conservator of your assets. This means you will avoid
the time and expenses associated with guardianship or conservatorship
proceedings.
The RLT can also be designed to protect the federal estate tax
exemptions at your death or your spouse's death. When you combine
the RLT with a gift program or other types of trusts, it may also
be possible to avoid virtually all state or federal death
taxes at both your death and the death of your spouse, regardless
of the size of your estate.
7. Do I have to give up control over my property?
No. During your lifetime you and if married, your spouse can be
trustee(s) of your RLT. This means you will continue to make your
own financial decisions just as you always have. There are no special
reports to fill out or accounting procedures to learn as long as
you or your spouse are a trustee. You fill out your income tax return
the same as you always have.
8. Is an RLT for everyone?
Not always, but if the benefits of avoiding probate, avoiding conservatorship
proceeding, reducing or avoiding death taxes, and keeping affairs
private are attractive to you, a RLT can be an effective tool for
managing your assets during your lifetime, during disability and
in providing for the orderly distribution of your property at death.
9. Can I fund my own RLT?
Definitely. You simply re-title your home, investment accounts,
your CDs and other assets to your name as trustee. Your attorney
and financial planner can assist you in this, if necessary. (Your
IRA or other retirement accounts will not be transferred
to your trust.)
10. Who should draft my RLT?
Not all attorneys are familiar with Trust Law, the drafting and
funding of RLTs, or the best use of trusts. Many attorneys routinely
draft only wills. Therefore, you should choose an attorney with
experience in drafting trusts. The attorney should also be familiar
with the area of long term care planning, estate taxation, elder
law, trust funding and administration. The right attorney should
be able to recognize your estate planning needs and offer you effective
solutions and recommendations.
11. Is there anything else I should do?
Yes, you should also discuss with your attorney how to plan the
distribution from your retirement plan, IRA or 401k, your long term
care concerns, the need for an Advanced Medical Directive and a
Durable Power of Attorney. You should also review the beneficiary
designations on your life insurance, annuities and retirement plans.
These steps are all part of effective estate planning.
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