What is a revocable living trust? 

A trust is a legal tool which allows a person to place all of his or her assets into one instrument and designate how the assets are to be distributed upon his or her death.

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1. PEACE OF MIND – The most common reason for implementing a living trust package is the peace of knowing that all of one’s affairs are in order; all of the necessary information and documentation regarding your last wishes and the distribution of your assets is put together in one place for easy reference upon your passing, making your heirs’ job less stressful during an already difficult time.

2. PRIVACY – If your estate goes through the dreaded probate system, all of the information is public record. Anyone can go into probate court and obtain a copy of your will, a list of the names and addresses of your heirs, a list of your debts, and a list of your assets and their values. A living trust, however, is totally private and no one but the trustees need ever know its contents, even upon your passing.

3. SECURITY – While will contests are all too common, a living trust offers a tool for distributing assets that is virtually uncontestable.

4. AVOID GUARDIANSHIP/CONSERVATORSHIP – Without a living trust, if you ever become unable to manage your affairs, it may be necessary for your loved ones to go to probate court and be granted guardianship by a judge --– often an expensive and time-consuming procedure. Then, the probate court will monitor every penny spent by your guardian. A living trust, on the other hand, provides a means to avoid this hassle by your naming a successor trustee (usually one of your children) who steps in and acts if you become unable to.

5. SAVE MONEY BY AVOIDING PROBATE – Probate is a lengthy process, on average more than a year, and is ridden with incredibly high attorney’s fees that are based not on the number of hours the attorney spends on the matter, but as a percentage of the value of your estate.  A properly funded trust completely avoids probate and avoids those attorney’s fees as well as probate court filing fees.

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Why a will may not enough 

There are a number of reasons that a trust may be superior to a will for asset distribution:

1. With a will, your estate is subject to probate and therefore becomes public record. This means that not only the contents of your will become public, but also the value of your assets owned at death, the names and addresses of the beneficiaries of your will, and the names of your creditors, among others. A trust, on the other hand, is a tool to avoid probate, and is completely private. Your trust will NOT become public record.

2. A will must go through the probate court process and will remain open for at least one year to allow creditors to file claims they may have against your estate. It is not unusual for probate to take up to 18 months! A living trust, on the other hand, allows immediate distribution of your assets to the beneficiaries upon your death.

3. Going through the probate process typically involves the services of an attorney, which can be very costly. Not only are there filing fees to be paid to the court, but probate courts have a table which governs the fees an attorney may charge to take an estate through probate. This fee is based not on the number of hours the attorney must put into settling the estate, but rather is based on the value of the estate’s assets. (Even attorneys who offer to take less than this court-allowed amount will likely be paid far more than the cost of establishing a trust during your lifetime would be.) The attorney is the first person in line to be paid out of the estate assets, followed by taxing agencies and, finally, the beneficiaries of the estate. A trust, avoiding probate, effectively eliminates these added expenses.

4. A trust is much less likely to be contested than a will.

5. A trust is a tool which can have huge tax-saving advantages for larger estates (those with assets totaling more than $1,500,000) that are not available with a will. see Tax Advantages of Living Trusts

6. A will does not provide the peace of mind that a complete estate plan offers. A properly drafted estate plan addresses issues such as future incapacity, avoiding the necessity of guardianship or conservatorship proceedings, a living will, powers of attorney for both business and health care decisions and other documents that offer the peace of mind that one’s affairs will be in order if there is a mental or physical health problem in the future.

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What a complete estate plan should address 

A properly drafted estate plan is designed not only to provide cost savings to you, but, more importantly, to provide you with peace-of-mind that you have done everything possible to ensure that your loved ones have all of the tools necessary to take care of you in old age without expensive and time-consuming court involvement. The following is a list of documents I provide in every estate plan I do, in addition to the trust itself. There is more detail on these documents elsewhere on this site:

-Durable General Power of Attorney
-Durable Power of Attorney for Health Care
-Nomination of Guardian
-Living Will
-Pour-Over Will
-Anatomical Gift Donation Form
-General Instructions Regarding the Trust
-Grantor’s Wishes (funeral instructions)
-Asset Transfer Letters

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If you already have a living trust 

There are several things you must keep in mind if you already have a living trust. First of all, your trust must be funded. There have been many situations where an attorney drafts a trust for a client and leaves the client with a trust that is funded with $100.00, for example. This trust is entirely useless as it is. One of the main objectives with a living trust is to avoid probate, and the only way to avoid probate completely is to have all of your assets either in the trust or in a non-probate form. The deeds to any property you own should be in the name of the trust, the trust should be the contingent beneficiary of your accounts and insurance policies, etc. It is important that you understand that an unfounded trust is totally without value to your loved ones when you die. The trust itself may be valid, but for it to be effective, you must make sure it is funded. If you die with an unfunded trust, you have not only paid an attorney for the drafting of the trust, but your estate will then spend money on the attorney to probate your estate, thereby defeating one of the main purposes of a trust --- probate avoidance!!

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Won't a trust force me to surrender control of my assets? 

Although the rule once was that a settlor (person creating the trust) could not also be a trustee (person in control of the trust assets), that rule has changed. You can maintain complete control of your assets. Typically, when a couple is creating a trust, they are named as co-trustees of their trust and they name successor trustees. If one of the spouses becomes unable to or chooses not to be a trustee any longer, the other spouse is sole trustee. If neither are able or willing to be trustee, they have named someone else to take over as trustee. This successor trustee is often a child of the couple, or several children who serve as co-trustees.

As trustee, you are still in complete control of your assets. You can sell anything within the trust at any time and spend the proceeds on whatever you want to. The transferablility of assets is not affected by the trust.

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Federal estate and gift taxes 

Unified tax – The federal estate and gift tax is a tax that is applicable to transfers made during your life and to transfers that occur upon your death when your assets pass to your beneficiaries from your estate. The tax is due from the transferor of the property.

Lifetime Credit – Every individual has a lifetime tax credit for the transfer of up to $1,500,000. Above this amount, the federal estate and gift tax begins at 37% and goes up to 55%. This means that at least $0.37 of every dollar goes to Uncle Sam!

Annual Exclusion – Currently, every individual can make a tax-free gift of up to $11,000 per donee per year without being subject to federal estate or gift taxes. If you gift an amount in excess of $11,000 to one person, the amount over goes toward reducing the lifetime exclusion of $1,500,000.

Marital and Charitable Deductions – The law allows unlimited gifts to be made to one’s spouse or qualified charities without being subject to federal estate and gift tax. While this rule allows the estate of the first spouse to die to avoid any federal estate taxes, the second spouse to die is going to have twice as many assets at death (presumably) and have only one lifetime exclusion of $1,500,000 available. The first spouse to die "wasted" his or her lifetime exclusion by just passing everything directly to his spouse. Creation of a "Bypass Trust" or "Marital Deduction Trust" allows one to avoid this "waste."

Bypass Trust – Use of this trust allows a couple to pass $1,350,000 free of the federal estate and gift tax by utilizing the lifetime exclusions of both spouses. When the first spouse passes away, the survivor spouse gets $1,500,000. This is the amount of the deceased spouse’s exclusion. A trust, called, appropriately enough, the Bypass Trust, holds the remainder of the assets. This trust provides income to the survivor and the surviving spouse can also have access to the principle if needed.

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What does a complete estate plan include? 

-Memorandum of Trust
-the trust document
-Living Will
-Durable Power of Attorney for Financial Affairs
-Durable Power of Attorney for Health Care
-Anatomical Gift Donation Form
-Pour-Over Will
-Final Instructions
-tools for trust amendments
-Appointment of Conservator
-Special Distributions
-Asset Transfer Assistance

It is important to know that if your trust is unfunded, it is totally useless to you. We provide all of the assistance and tools you need to get your assets into your trust. Additionally, the cost of your trust package includes lifetime phone support for both questions regarding your trust(s) and amendments to your trust that can be done via a phone call.

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There are several possible explanations for this. First, advanced estate planning is a unique area of law that many, if not most, attorneys are untrained in. Your attorney may not even be aware of the benefits of a living trust. A second possible explanation reiterates why most people need a living trust. Attorneys who do a lot of wills are anticipating a future income through the probating of those wills when those clients die. Doing a lot of wills is a type of attorney retirement plan. Some attorneys will give free wills to clients, an investment well worth their time if at a later date the attorney takes that will through probate. A living trust, while somewhat more expensive to set up than a basic will, does not have that pot ‘o gold waiting at the end for your attorney. At your passing, your hard-earned money goes to your loved ones – not their attorney. Even a very modest estate that goes through probate can be subject to attorney fees equivalent to several times the cost of a complete estate package.

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