What is a "Living Trust"?
A trust is merely an agreement (i.e., a “contract”)
between two parties, the person establishing the trust
(the “settlor”) and the person holding the property (the
“trustee”), to hold property for the benefit of another
(the ”beneficiary”). In a typical living trust
situation, these three legal “persons” are, in
actuality, the same person (i.e.,
you). The term
“living trust” merely means that the trust is
established and funded during your lifetime rather than
being a trust which is described in your will (a
“testamentary” trust) and which must go through probate
to be created and 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 (i.e., age and competency) and for
the trust to actually own something (the “corpus”). In
our trusts, we initially “fund” the trust with $10 to
make it effective (you don’t actually have to transfer
the $10) and then you can assign, deed and transfer your
other 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 the trust nor the Will need to be
recorded or filed with any governmental entity (although
the deed transferring real property is usually recorded
with the County Recorder). That is all that is needed; a
trust does not need to be created by, reviewed by or
signed by an attorney. It is always a good idea to let
your successor trustee know that the trust exists and
where you keep the original documents.
Our documents all utilize the same underlying
templates and language as the software which we market
to attorneys through-out the country. The documents are
specific to each state and all of the language was
drafted by attorneys who are certified specialists in
Estate Planning, Trust and Probate Law.
( Return to Top of Page )
Why 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 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 beneficiaries, instead of being siphoned off to government processes, attorneys and bureaucrats.
( Return to Top of Page )
If 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 "Intestate Probate" and guarantees government interference in the disposition of your estate. Documents must be filed and approval must be received from a court to pay your bills, pay your spouse an allowance, and account for your property--and it all takes place in the public's view. If you fail to plan your estate, you lose the opportunity to protect your family from an impersonal, complex governmental process that can become a nightmare. Then there is the matter of the federal government's death taxes. There is much you can do in planning your estate that will reduce and even eliminate death taxes, but you don't suppose the government's estate plan is designed to save your estate from taxes, do you? All estate planners agree that dying without an estate plan should be avoided at all costs.
( Return to Top of Page )
What's the difference between having 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 becomes a public document available for inspection by all comers. And, once your will enters the probate process, it's no longer controlled by your family, but by the court and probate attorneys. Probate can be cumbersome, time-consuming, expensive, and emotionally traumatic during a family's time of grief and vulnerability. Con artists and others with less-than-pure financial motives have been known to use their knowledge about the contents of a will to prey on survivors. A Living Trust avoids probate because your property is owned by the trust, so technically there's nothing for the probate courts to administer. Whomever you name as your "successor trustee" gains control of your assets and distributes them 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 can help you preserve and increase your estate while you're alive, and offers protection should you become mentally disabled. Please note that even with a Living Trust you should still have a complementary will (known as a "pour-over will"; this type of will makes sure that any assets which may not be in your Living Trust at the time of your death "pours-over" to the trust so everything is distributed pursuant to the terms of your Living Trust. Our Trust Package includes all of the necessary estate planning documents including the "pour-over will".
( Return to Top of Page )
What's the difference between having a "Living Will" and a "Living Trust"?
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 Package.
( Return to Top of Page )
The 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 would be subject to "living probate," also known as a conservatorship or guardianship proceeding. If you become mentally disabled before you die, the probate court will 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. The process is often expensive, time-consuming and humiliating. A Living Trust will avoid this process because your assets are titled in the trust and you have appointed someone to act as the successor trustee of the trust if you are no longer able to act' further, if you have created the appropriate Health Care powers, you have already given someone else the ability to make health care decisions on your behalf. In short, with a properly drafted and complete estate plan, you can eliminate the "living probate"!
( Return to Top of Page )
I have heard that my old health care powers 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 (e.g., your doctor) can release medical information to
your agents and interested persons. This can often
present a "Catch-22" situation: the powers of attorney
are effective only on your incapacity, but if you are
incapacitated how can you authorize the release of the
information necessary to establish that you are
incapacitated? Because HIPAA has no "grandfather"
exceptions, previously executed estate planning
documents may now be useless unless the documents specifically address the HIPAA requirements.
The documents provided by most of the other on-line trust preparation services
are not HIPAA compliant. 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.
( Return to Top of Page )
If I set up a Living Trust, can I be my own trustee?
YES. In fact, people who create most Living Trusts act as their own trustees. If you are married, you and your spouse can act as co-trustees. And 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 affairs, not the court's appointee.
( Return to Top of Page )
Will a Living Trust avoid income taxes?
NO. The purpose of creating a Living Trust is to avoid living probate, death probate, and reduce or even eliminate federal estate taxes. It's 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.
( Return to Top of Page )
Can I transfer real estate into a Living Trust?
YES. In fact, all real estate should be transferred into your Living Trust. Otherwise, upon your death, depending on how you hold the title, there will be a death probate in every state in which you hold real property. When your real property is owned by your Living Trust, there is no probate anywhere.
( Return to Top of Page )
Is a Living Trust valid in all states?
YES, a Living Trust is valid in all fifty states, plus the District of Columbia; however, the Living Trusts on the Web program is only specific for forty-nine states, plus the District of Columbia. Sorry residents of Louisiana, but your Napoleonic Civil Law history makes your laws too unique for even as sophisticated program as we offer.
( Return to Top of Page )
Is the Living Trust some kind of loophole the government will eventually close down?
NO. The Living Trust has been authorized by the law for centuries. The government really has no interest in making you or your family suffer a probate that will only further clog up the legal system. A Living Trust avoids probate so that your estate is settled exactly according to your wishes.
( Return to Top of Page )
Isn't a Living Trust only for the rich?
NO. A Living Trust can help anyone protect his or her family from unnecessary probate fees, attorney's fees, court costs and federal and/or state estate taxes. Any person with an estate large enough to require probate (from $25,000 to $100,000 depending of the state) will derive meaningful benefits from a Living Trust. Besides, how rich do you have to be to want your assets protected from an unnecessary court procedure in the event you become incapacitated; a conservatorship/guardianship is just like a probate except you're still alive!
( Return to Top of Page )
I 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 (with all of the costs and delays involved in that process). 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 the 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 age at which ALL guardianships must terminate). The management of a beneficiary's asset 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 (e.g., education).
( Return to Top of Page )
Will my estate have to pay any "Death Taxes?
Whether your estate will be required to pay any tax on your estate at the time of your death depends on a number of variables: (1) the size of your estate; (2) the beneficiaries of your estate; (3) the federal estate tax laws at the time of your death; and, (4) the laws of your state of residency at the time of your death. Currently, an estate of under $2,000,000 does not have to pay any federal estate tax; however, many states are creating a separate death tax to make up for the lost revenue since the federal government no longer shares any of the estate tax it collects (click here for a list of those states which impose a separate death tax). Generally, any part of your estate going to a surviving spouse or to a qualified charity is exempt from the tax. If your estate must pay tax, the federal rate is between 40 to 46% (the rate for a state tax is generally much lower).
( Return to Top of Page )
Will a Living Trust save on "Death Taxes?
If your estate is subject to death tax (whether federal and/or state), the trust can save substantial taxes for a married couple (this savings is obtained by being able to use the exemption amount at each death instead of just at the death of the surviving spouse -- see the next FAQ). However, a Living Trust will not save any death taxes for an individual (if your estate is above the tax exemption amount and it is not going to a spouse or a charity, it will be taxed whether it is in a trust or not).
( Return to Top of Page )
We are not married, can we still have a Joint Living Trust?
Only Living Trusts on the Web gives you the option to prepare a Joint Trust (along with all of the matching supporting documents for a "Non-traditional Couple". The software automatically determines the best type of Trust for you (after taking into account the estate tax situation).
( Return to Top of Page )
We are married, what type of Living Trust do we need? What about an "A/B Trust"?
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 (both federal and state), 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 trust are:
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 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 a portion (up to the entire amount) of the decedent's estate into an irrevocable tax avoidance sub-trust (created, if necessary, by the terms of the trust after the first death) which 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 require the creation of a separate trust for tax purposes; it defers the decision of what planning is necessary until the time of death when the size of the estate and the exact nature of the tax laws is 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" [who said lawyers aren't clever]). Anyway, the deceased spouse's
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 $2M) and the surviving spouse's
trust (cleverly named as the "Survivor's Trust") receives the balance. Another version, the
"ABC Trust", has the excess of the deceased spouse's estate above the exemption amount going to another 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) are irrevocable trusts 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 children). The balance in the Survivor's Trust including any excess (or the
Marital Deduction Trust if the excess went there) 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 (and the
Marital Deduction Trust) are 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.
Using some sample numbers, the scenario would work like this:
$3,000,000 estate
1st Death: $1,500,000 goes into the Decedent's Trust (no tax because this trust is under the $2,000,000 exemption) and $1,500,00 goes into the Survivor's Trust (no tax because the survivor is still living).
2nd Death: The Survivor's Trust is now $2,000,000 (growth of assets) and the Decedent's Trust is now $2,500,00 (better growth). Assuming the exemption was still $2,000,000, there would be no tax on the Survivor's Trust (covered by the exemption) and no tax on the Decedent's Trust (regardless of the amount). Your heirs save approximately $1,125,000 (45% of the $2,500,000 otherwise subject to tax).
If the estate were $5,000,000, the situation would be the same except only $2,000,000 would go into the Decedent's Trust (remember it is funded with the maximum that can pass estate tax free) and the remaining $500,000 would either fund the
Marital Deduction Trust or the Survivor's Trust (again no tax at the 1st death because of the unlimited marital deduction). At the death of the survivor, if the exemption was still $2,000,000, there would be a tax on the excess $1,000,000 but the full $4,000,000 (plus any appreciation in the Decedent's Trust) would pass tax free.
As you can see, the Disclaimer and the A/B concept is relatively simple; that
is, take advantage of the exemption amount at both deaths so it is doubled. The form of trust and the operative language is more complicated; however, with our software you don't need to worry about that since it is automatically done for you (including incorporating the planning for any state death tax if your state has a separate tax).
Unlike any other on-line trust preparation program, our software offers all of the above described types of trusts for a married couple; a simple
"probate avoidance trust", a "disclaimer trust", an "A/B trust" and an "ABC trust". You are not required to try to figure out the correct version; our software uses a unique
"matrix" which analyses your responses to certain questions, as well as the most up-to-date status of the federal and your state's tax laws, to determine what is the appropriate form of trust for your situation.
( Return to Top of Page )
My 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.
Only our software will create the appropriate trust for you based on the information you provide in the assembly process.
( Return to Top of Page )
If my estate will not have to pay any "Death Tax", why do I need a Living Trust?
Saving on estate taxes (for a married couple) is just one of the benefits of a Living Trust. If your estate is over your state's "small estate" limit (usually $30,000 to $100,000 depending on the state), then your estate must go through the expense, delay and publicity of a court administered probate proceeding at your death if you do not have a Living Trust. Further, death taxes have no bearing on the protection a Living Trust and the appropriate health care powers can provide in the event of your incapacity.
( Return to Top of Page )
I'm very concerned about internet security; how safe is your site?
Our site is the safest possible because, unlike all other internet document preparation sites, everything you do is created on just your computer. All information you provide is sent via a 128 bit secured SSL connection; likewise, your payment information is handled by our credit card processor (in this case, PayPal) through their encrypted and secure system. The most important point is that the final estate plan document is only on your computer.
( Return to Top of Page )
I have a pet which I want to make sure is cared for after my death, can I do that with a Living Trust?
Our site allows you to 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"; that is a third party who has the right to make sure the funds are acting being used for the care of the animal.
( Return to Top of Page )
How much does a complete estate planning package cost?
If you went to an attorney, especially an experienced attorney who specialized in estate planning, you could expect to pay from $1,000 to $1,500 as an individual and from $1,500 to $3,500
as a married couple. Even the cut-rate or discount firms, with their "cookie-cutter" forms, would charge you from $700 to $1,200. With Living Trusts on the Web, you get the same quality estate plan as you would expect from an estate planning specialist for $149 for an individual and $199 for a married couple. Some sites "quote" one price for the trust but then charge you separately for the other necessary documents; you can pay well over 2 or 3 times our price.
Our price is for the complete estate plan.
( Return to Top of Page )
What should I consider before I begin?
You should decide on (1) who will be the successor trustee in the event of death or incapacity; (2) if you have minor children, who should be the Guardian; (3) who will make health care decisions for you if you cannot make them yourself; and, (4) how your estate will be distributed at your death.
( Return to Top of Page )
What happens if I want to proceed?
(1) As mentioned in the previous Answer, you should
decide on some important estate planning considerations;
(3) You will complete a Registration Form which will be your Log-in to the
system and so we can contact you if there are any changes in federal or your state's law which might affect your trust;
(3) You will see a short "Navigation Tutorial";
(4) You will then begin the interview process (please add this page to your "Favorites") 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 for the software
to assemble a custom living trust package for your
individual situation;
(5) After the interview, you will be taken to the
encrypted and secure PayPal site for payment (all major
credit cards are accepted and you do not need to have or
create a PayPal account);
(6) Upon acceptance of your credit card (usually a
matter of seconds), you will be returned to our download
site where your complete trust package will be
downloaded, completely assembled and fully formatted,
into your word processor; and,
(7) You can then do a final edit, print the package (which includes complete signing instructions); once you sign and date the documents, and have the necessary pages witnessed or signed by a Notary Public, your trust is fully implemented and
is immediately effective.
( Return to Top of Page )
What 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. When you finish the process, you will be entitled, upon request, to receive a password which will allow you to 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 the date of the existing trust, so you do not need to re-title any of the assets already titled in the name of the existing trust. Normally, the cost of a Restated Amendment is the same as creating a new trust (which is, in effect, what it is); however, with the password you will be able to create the Restated Amendment, whenever you need to do so, for half of the currently offered price of the trust package.
( Return to Top of Page )
What 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 (full details are included in the Funding Instructions included in the Trust Package), 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 (IRS Regulations provide that a revocable living trust uses the tax identification number -- your Social Security Number -- of the Grantor as its identification number and no separate tax returns should be filed for the trust).
( Return to Top of Page )
Can I transfer US Saving Bonds to 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,
including 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. This will give you some
satisfaction that the bonds were actually delivered.
( Return to Top of Page )
