What is a
A trust is merely an agreement, like a contract, between two
parties. The person establishing the trust (the “Settlor" or
"Trustor”) and the person holding the property (the “Trustee”) hold
property for the benefit of another (the “Beneficiary”). In a typical
living trust, these three legal “persons” are the same person; you. The
term “living trust” means that the trust is established and funded during
your lifetime, as opposed to a testamentary trust which is created in your
will and must go through probate to be funded. In order for a trust to be a
valid, binding instrument; all that is necessary is for the parties
executing it to have the legal capacity to enter into a contract, including
age and competency, and for the trust to actually own something (the
“corpus”). To fund the trust, you can assign, deed
and transfer your assets into the existing trust, including your real property.
Once the trust is signed, dated and acknowledged by a Notary Public, it is
in full force and effect. Neither your trust nor your will need to be
recorded, with the exception that the deed transferring real property is
usually recorded with the applicable Recorder's Office.
should I consider before I begin?
You should decide on:
- Who will be the successor
trustee in the event of death or incapacity;
- If you have minor children,
who should be the Guardian;
- Who will make health care
and financial decisions for you if you cannot make them yourself; and
- How your estate will be
distributed at your death.
happens if I want to proceed?
As mentioned in the previous answer, first you should decide
on some important estate planning considerations, then:
- You will complete a
Registration Form so we can contact you if we have questions durning our review of your interview or if there
are any changes in federal or state law which might affect your trust;
- You will log into the
system and begin the interview process which will take you screen by
screen through the context sensitive question and answer process. You
can save your answers and come back at a later time to finish. At the conclusion
of the interview, you will have provided all the necessary information
to assemble a custom living trust package for your individual
- You can preview a draft of
your estate plan at home;
- We will review your estate
plan and make necessary changes to reflect your particular needs and
if I need to make changes or the tax laws change?
As mentioned above, as part of the process, you will
register with us; if there are any changes in federal and/or state law
which may affect your trust, you will receive notification. Should a change
be necessary, you can create a Restated Amendment at any time in the
future. A Restated Amendment completely rewrites your estate plan; so it
will have all the new language if there have been any legal changes which
would affect your trust; and will allow you to implement any changes you
need to make to keep your trust current. However, the Restated Amendment
keeps your existing trust name and date, so you do not need to re-title any
of the assets already titled in the name of the existing trust.
do I need an estate plan?
Most of us spend a considerable amount of time and energy in
our lives accumulating wealth. With this, there comes a time to preserve
wealth both for your enjoyment and for future generations. A solid,
effective estate plan ensures that your hard-earned wealth will remain
available for your care and will remain intact when it passes to your
I don't create an estate plan, won't the government provide one for me?
Yes. But your family may not like it. The government's
estate plan is called Intestacy and guarantees government interference in
the disposition of your estate. Documents to appoint an Administrator must
be filed with the Probate Court and their approval must be obtained. If you
fail to plan for your estate; you lose the opportunity to protect your
family from a complex process that can be timely and costly; and which
might have unwanted consequences in the distribution of your estate.
Additionally, you have to consider estate taxes. There is much you can do
in planning your estate that will reduce and can even eliminate estate
is the difference between a Will and a "Living Trust"?
A Will is a legal document that describes how your assets
should be distributed in the event of death. The actual distribution,
however, is controlled by a legal process called probate, which is Latin
for "prove the will." Upon your death, the Will must be filed
with the Probate Court and becomes a public document available for
inspection. Probate can be cumbersome, time-consuming and expensive. A
Living Trust avoids probate because if your assets are properly placed in
the trust, the trust becomes the owner of that asset. Like a corporation, a
trust is not a living person, so if your trust owns your assets,
technically there's nothing for the probate courts to administer. Whomever
you name as your "successor trustee" gains control of your assets
immediately upon your inability to act as trustee and they are distribute
your assets exactly according to your instructions. There is one other
crucial difference: A Will doesn't take effect until your death, and is
therefore no help to you during lifetime planning, an increasingly
important consideration since Americans are now living longer. A Living
Trust offers protection should you become disabled. Please note that even
with a Living Trust, you should still have a Will known
as a "pour-over will"; which makes sure that any assets not in
your Living Trust at the time of your death, "pour-over" into the
trust to be distrubted with the other trust
assets. Your Trust Package will include all of the necessary estate
planning documents including a "pour-over will".
I set up a Living Trust, can I be my own trustee?
Yes. In fact, most people who create Living Trusts act as
their own trustee. If you are married, you and your spouse can act as
co-trustees. During your life, you will have absolute and complete control
over all of the assets in your trust. In the event of a mentally disabling
condition, your hand-picked successor trustee assumes control over your
a Living Trust valid in all states?
Yes, a Living Trust is valid in all fifty states, plus the
District of Columbia.
a Living Trust only for the rich?
No. A Living Trust can help anyone protect his or her family
from unnecessary probate and court costs, and federal and state estate
taxes. Any person with an estate large enough to require probate will
derive meaningful benefits from a Living Trust. In addition, only a Living
Trust can avoid all of the problems, including court supervision, which can
occur in the event of your incapcity.
a Living Trust save on Estate Taxes?
If your estate is subject to either federal or state estate
tax, a trust can save substantial taxes for a married couple. These savings
are obtained by being able to use the exemption amount at each death,
instead of just at the death of the surviving spouse. However, a Living
Trust will not save any death taxes for an individual unless other
deductions are available (for example, if you give a portion of your assets
my estate have to pay any Estate Taxes?
Whether your estate will be required to pay any tax on your
estate at the time of your death depends on the size of your estate and the
tax laws at the time of your death. Currently, an estate of under $5,340,000
does not have to pay any federal estate tax; however, many states have a separate
estate tax. Our estate planning, unlike most "on-line" services
takes into account the state death tax as well as the federal estate tax.
Generally, any part of your estate going to a surviving spouse or to a
qualified charity is exempt from estate tax. If your estate must pay tax,
the federal estate tax rate is 40 percent. Typically state estate tax rates
are considerably lower. Please note, that the
exemption and tax rate are subject to change; the Democratic Party has
stated that it would like to see the Estate Tax return to the 2009 levels
($3.5M exempt and a 45% rate).
a Living Trust avoid income taxes?
No. The purpose of creating a Living Trust is to avoid
probate, guardianship, conservatorship, and reduce or even eliminate
federal and state estate taxes; it is not a vehicle for reducing income
taxes. In fact, if you're the trustee of your Living Trust, you will file
your income tax returns exactly as you filed them before the trust existed.
There are no new returns to file and no new liabilities are created.
a Living Trust protect my assets should I have to go into a nursing home?
No. Because you maintain complete control over your assets
titled in your Living Trust, those assets are considered available for your
use should you have to go into a nursing home.
my estate will not have to pay any estate tax, why do I need a Living
Saving on estate taxes is just one of the benefits of a
Living Trust. If your estate is over your state's "small estate"
limit, then your estate must go through the expense and delay of a court
administered probate proceeding at your death. Further, estate taxes have
no bearing on the protections which a Living Trust (along with the
appropriate health care power and general power of attorney) can provide in
the event of your incapacity.
have minor children; what happens if I die?
One of the most important things you can do as a parent is
to protect your children, especially when they are minors. If you die, the
Court will appoint a Guardian for any minor child; therefore, if you want
to determine who that person will be, you need to designate your choice of
the Guardian in your Will. Without a trust, the Guardian will also take
charge of the assets going to the child, which will be under court
supervision, until the child attains age 18. With a trust, when minors are
the beneficiaries, your designated successor Trustee can manage and invest
the trust funds, free of the costs and restrictions that arise when the
Court appoints a Guardian. Often times, the person you may want to raise
your children might not be the best person to manage the assets. With a
trust, you can have the duties split or you can have the same person
performing both functions. Additionally, with a trust, you can continue the
management of a beneficiary's assets to whatever age you desire; certainly
beyond age 18. The management of a beneficiary's assets in a trust can
include disbursement of assets and/or funds in increments, according to
your directions (e.g., 1/3 distribution at age 25, 1/3 distribution at age
30, and the balance at age 35). Of course, during this period, the trustee
can use any, or all, of the trust principal for the benefit of the
beneficiary for such beneficiary's health, education and support.
are married; what type of Living Trust do we need?
There are a number of different trust types for a married
couple; all of which are typified by the result after the first death. The
factors which go into determining the correct type of trust are the size of
the estate, the tax laws, the underlying ownership of the trust assets and
the comfort level the couple has with the degree of control the survivor
should have over the trust. Based on these factors, the different types of
A "probate avoidance trust" which continues everything in a
single trust for the benefit of the survivor who maintains the complete
right of change and/or revocability. Typically, this type of a trust is
utilized when there will be no possibility of estate tax and there is no
issue about the control the survivor will have over the entire trust.
A "disclaimer trust" which is like the probate avoidance trust,
except the surviving spouse has the opportunity to disclaim any portion of
the decedent's estate into an irrevocable tax
avoidance sub-trust. This sub-trust is created, if necessary, by the terms
of the trust after the first death, and then passes tax free at the
survivor's death. This is a very useful trust given the uncertainty of the
estate tax laws and the likelihood that most estates will not actually
require the creation of a separate trust for tax purposes; it defers the
decision of what estate tax planning is necessary until the time of the
first death, when the size of the estate and the exact nature of the tax
laws are clearly defined. Typically, this type of trust is utilized when
there is no concern with the survivor having full control over the trust.
An "A/B Trust" is called that because, at the first death, the
joint trust splits into two sub-trusts (originally labeled the "A
Trust" and the "B Trust". The deceased spouse's sub-trust
(which we call the "Decedent's Trust") is funded up to the
maximum amount which can pass tax free in the year of death (currently $5.25M)
and the surviving spouse's sub-trust (named as the "Survivor's
Trust") receives the balance. The Decedent's Trust is irrevocable and
is held for the lifetime of the surviving spouse (typically, the survivor
is the sole trustee and has the right to all of the income and the right to
use any or all of the principal of the sub-trust for her/his benefit);
however, this sub-trust can be protected from creditors of the surviving
spouse (including the "spend-down" for Medicaid) and survivor
cannot leave the assets of the Decedent's Trust to anyone other than the
children. The balance in the Survivor's Trust qualifies for the unlimited
marital deduction and no tax is due at the first death. At the death of the
survivor, what is in the Survivor's Trust is subject to tax, but only to
the extent that the total is above the exemption amount in the year of the
survivor's death. The Decedent's Trust, because it was already subject to
tax at the first death and because it is an irrevocable trust, passes
estate tax free at the second death. Because of the higher exemption amount
and the loss of a potential income tax benefit at the death of the
surviving spouse, this type of trust is not recommended for most situations
(although it may still be beneficial for "non-traditional"
With the 2010 Tax Relief Act and the American Taxpayer Relief Act of 2012,
a new type of trust called a "Marital Deduction Trust" is now our
recommended choice for many estates. At the first death, the joint trust
again splits into two sub-trusts; the deceased spouse's sub-trust (which we
call the "Decedent's Trust") is funded with the deceased spouse's
estate up to the maximum amount which can pass tax free in the year of
death (currently $5.25M) and the "Survivor's Trust" receives the
survivor's estate. As with the "A/B Trust", the Decedent's Trust
is irrevocable and is held for the lifetime of the surviving spouse
(typically, the survivor is the sole trustee and has the right to all of
the income and the right to use any or all of the principal of the
sub-trust for her/his benefit); as with the A/B Trust, this sub-trust can
be protected from creditors of the surviving spouse (including the
"spend-down" for Medicaid) and survivor cannot leave the assets
of the Decedent's Trust to anyone other than the children. The balance in
the Survivor's Trust qualifies for the unlimited marital deduction and no
tax is due at the first death. At the death of the survivor, because the
Decedent's Trust is treated as part of the survivor's taxable estate (even
though no tax must be paid), the assets in this trust receive a new basis
adjustment (a "step-up") and the heirs can sell the entire estate
with no capital gains tax.
Another version, the "ABC Trust", has the excess of the deceased
spouse's estate above the exemption amount going to another sub-trust often
called a QTIP ("qualified terminable interest property trust" -
which we label as the "Marital Deduction Trust"). The Decedent's
Trust (as well as the Marital Deduction Trust, if applicable) is an
irrevocable trust held for the lifetime of the surviving spouse. Typically,
the survivor is the sole trustee and has the right to all of the income and
the right to use any or all of the principal of the trust for her/his
benefit; however, the survivor cannot leave the trust to anyone other than
the beneficiaries initially named. The balance of
the assets which are not allocated into the two irrevocable trusts are
placed in the Survivor's Trust which qualifies for the unlimited marital
deduction and results in no estate tax at the first death. At the death of
the survivor, what is in the Survivor's Trust is subject to tax, but only
to the extent that the total is above the exemption amount in the year of
the survivor's death. The Decedent's Trust, because it was already subject
to tax at the first death and because it is an irrevocable trust, passes estate
tax free at the second death. The Marital Deduction Trust is only subject
to tax to the extent that it and the Survivor's Trust exceeds
the available exemption amount at the time of the survivor’s death.
You are not required to try to figure out the correct type of trust for
you; our software will determine which is the best type
of trust for your situation by using our unique "matrix" which
analyses your responses to certain questions, as well as the most
up-to-date status of the federal and state tax laws.
are not married; can we still have a Joint Living Trust?
You have the option to prepare a Joint Trust along with all
of the matching supporting documents for a "Non-traditional
Couple". We will determine the best type of Trust for you after taking
into account your estate tax situation. Please note that only a legally
married man and woman can use the Federal Estate Tax "unlimited
marital deduction"; this means that, although the full exemption
[currently $5.25M] is available at the first death, if the deceased party's
estate is greater than the exemption, there will be a tax due at the first
death (even with the trust). However, by properly structuring the trust,
you can keep the exemption amount from being taxed at the second death
(which means the two of you can leave up to $10.5M in assets free of
Federal Estate Tax!
spouse is not a U.S. citizen; are there any special problems?
Yes. A non-citizen surviving spouse can be required to pay
substantial estate taxes at the first death if a proper estate plan is not
in place. Depending on the size of the estate, it may be necessary to have
your Living Trust set up as a "Qualified Domestic Trust" to avoid
the payment of any taxes at the first death. We will create the appropriate
trust for you based on the information you provide in the assembly process.
do I have to do after I create a Living Trust?
Other than making sure that you title any newly acquired
asset in the name of the trust, the simple answer is "nothing".
Once a trust is created and funded, it will continue on until it is revoked
or it is distributed pursuant to its terms. There are no on-going costs or
fees to establishing a Living Trust; nor are there any separate accountings
or tax returns required during your lifetime. IRS Regulations provide that
a revocable living trust uses the tax identification number of the Grantor
-- your Social Security Number -- as its identification number and no
separate tax returns should be filed for the trust.
I transfer real estate into a Living Trust?
Yes. In most cases, all real estate should be transferred
into your Trust. Otherwise, upon your death, depending on how you hold the
title, there will be a probate in every state in which you hold real
property. When your real property is owned by your Living Trust, there is
no probate necessary.
I transfer US Savings Bonds into a Living Trust?
You can transfer United States savings bonds to a revocable
living trust without any tax consequence. The transfer is made by having
the bonds reissued in the name of the trustee. The form that must be used
to make the transfer is Department of the Treasury Bureau of Public Debt,
Form PD F 1851 E (Request to Reissue United States Savings Bonds to a
Personal Trust). Complete instructions for reissuing the bonds are set
forth in Form PD F 1851 E.
This form may be used to transfer all savings bonds, including Series EE,
Series E, Series HH, Series H, and Series I. Use Form PD F1851 to describe
the bonds. If more than 13 bonds are to be transferred, use Form PD F 3500
(Continuation Sheet for Listing Securities).
You should be aware, also, that your signature (as the bond holder) must be
certified by a certifying officer (this includes authorized employees of
insured depository institutions and corporate central credit unions). For a
complete list of certifying officers, see Department of Treasury Circular
No. 300 31CFR Part 306. This is not the same as having your signature
acknowledged by a notary public.
Since you will be transferring your savings bonds through the mail to a
Savings Bonds Processing Site (there are five sites specified in the
instructions), you should send them by registered or certified mail with a
return receipt requested.
the difference between having a "Living Will" and a "Living
A "Living Will" is a document that describes your
wishes regarding life support if you are ever in a terminal condition or
irreversible coma (think Terri Schiavo). As
mentioned above, a "Living Trust" deals with your assets either
in the event of incapacity or at death. Both are very important and
necessary parts of a proper estate plan and both are included in our Trust
possibility of a disabling injury or illness scares me. What would happen
if I were mentally disabled and had no estate plan or just a Will?
Unfortunately, you may have to become the subject of a
conservatorship or guardianship proceeding. If you become mentally disabled
before you die, the probate court can appoint someone to take control of
your assets and personal affairs. These court-appointed agents must file a
strict accounting of your finances with the court. A Living Trust will help
avoid this process because your assets are titled in the trust; and you have
already appointed someone to act as the successor trustee of your trust if
you are no longer able to act. Additionally, if you have created a Durable
Power of Attorney and Health Care power; you have already given someone
else the ability to make both financial and health care decisions on your
behalf. In short, with a properly drafted and complete estate plan, you can
eliminate the need for a guardianship or conservatorship.
have heard that my old health care power may be invalid; is this true?
Yes. New federal regulations known as the Health Insurance
Portability and Accountability Act ("HIPAA") imposes strict
privacy regulations on the disclosure of individually identifiable health
information. This necessitates the addition of specific release and consent
authority in all health care powers before any health care provider can
release medical information to your agents and interested persons. Because
HIPAA has no "grandfather" exceptions, previously executed estate
planning documents may now be useless unless the documents specifically
address the HIPAA requirements. All heath care documents and the living
trust included in our program are specifically HIPAA compliant and the
HIPAA release provisions are made effective immediately.
have a pet which I want to make sure is cared for after my death, can I do
that with a Living Trust?
You can create a "Pet Trust" as an option; this
trust can be for a specific animal or animals or for whatever animals
survive you. You can designate different trustees for the care of the pet
and the amount allocated for the care of the animal. You will also have the
option to designate a trust "enforcer"; this person is a third
party who has the right to make sure the funds are actually being used for
the care of the animal.
hearing about "Social Media Wills"; how do I protect my digital
Your digital assets and/or rights (including any “social
media”, on-line accounts and/or email accounts) will be automatically
transferred to the Trust with the “Assignment of Personal Property”
(created as part of the trust package); both the trust and the Durable
General Power of Attorney also specifically authorize the Trustee and Agent
to deal with digital assets and/or rights. However, it is important to
maintain a list of all of your digital assets and print it out on paper;
this list should include all of your on-line accounts as well as a list of
usernames and passwords. This is sensitive information, so protect this
information by keeping it in a secure place. Some people will put this
information in a sealed envelope to be opened only upon death or
incapacity. Wherever you keep this information, make sure you tell your
successor Trustee (and agent under the Power of Attorney, if different)
where this information can be found. You should update this list at least
yearly. In addition, tell your successor Trustee what you want done with
your digital assets. If you have a social networking site, such as Facebook
or LinkedIn, let your successor Trustee ones know whether you want the site
maintained following your death or whether you want the site removed (some
sites have specific policies regarding what happens when a person dies or
is incapacitated, so make sure you check each site’s policy). If you have a
collection of music or photographs, tell your successor Trustee what you
want done with those.
very concerned about Internet security; how safe is your site?
Our site is the safest possible. All information you provide
is sent via a 128 bit secured SSL connection. Further, we do not ask for
any truely sensitive information; although we
provide you with the option to input account number for the transfer
letters to your banks and other financial institutions, you can always
leave the account number field blank and enter the information by hand