1. A Revocable Living Trust performs a similar function as a will. They are helpful if you own property in multiple states, desire privacy, and want to avoid the probate process. A named Trustee distributes the estate to the named beneficiaries with little involvement from the courts. The Living Trust document itself names three different parties:
The Grantor is the individual or couple establishing the trust. The grantor controls what happens with the Trust Assets. Grantors are also referred to as Settlers, Trustors, and Donors. They determine the rules to be followed within the Trust. The Grantor is the only ones that can change the document’s terms, withdraw all of the assets prior to its termination, or revoke the trust in its entirety.
The Trustee is the person who manages the Trust in accordance with the written direction of the Grantor. It is not unusual for an individual to be both Grantor and Trustee. Alternate of Successor Trustees, who can be the adult children of the Grantor, are named to serve as Trustees in the event of the death or incompetency of the original Trustees. It is also possible to name a bank as Trustee or Successor Trustee. It is up to the Grantor to make this decision.
The Beneficiaries are the individuals who receive the income and the principle of the Trust. Typically, the Trustors, while alive, have sole access to all of the income and principal in the Trust. Upon the death of the Grantors, the income and principal are distributed to their children. It is important that only beneficiaries of suitable age and discretion receive sizeable distributions. Therefore, where minors are involved deferred payments in a series of installments is frequently the best approach.
Three major obstacles that prevent the estate planning objectives from being accomplished are:
2. An Irrevocable Living Trust is one that cannot be changed once it has been established. This type of trust is often used to reduce taxes or to provide for children for a specific purpose.
3. Special Needs Trust (sometimes called a supplemental needs trust) is used to provide for an individual with a physical or mental disability. The Special Needs Trust does not interfere with the disabled person’s government benefits such as Medicaid.
4. Qualified Personal Residence Trust allows one’s personal residence to be transferred into an irrevocable trust. The value of the property is assessed as of the date of transfer to the trust. The beneficiaries must be spouse or children, or brother or sister or spouse of these individuals. If the property is sold, it loses its tax benefits.
Single person: $399
Married under the estate tax exemption: $499
Married over the estate tax exemption (AB Trust): $699
- Living will: A written statement detailing a person’s desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent, esp. an advance directive.
- Power of Attorney: A Power of Attorney is a legal document delegating authority from one person to another. In the document, the maker of the Power of Attorney (the “principal”) grants the right to act on the maker’s behalf to an agent. What authority is granted depends on the specific language of the Power of Attorney. A person giving a Power of Attorney may make it very broad or may limit it to certain specific acts.
- Health Care Surrogate: It is a document naming another person as your representative to make medical decisions for you if you are unable to make them yourself. You can include instructions about any treatment you want or do not want, similar to a living will. You can also designate an alternate surrogate.
Last Will and Testament
A Last Will and Testament is a legal document with instructions to be followed upon the death of an individual.
A will can allow you to:
1. Name a personal representative (executor) to distribute your estate assets according to your wishes. This includes methods to make payments of debts and taxes.
2. Name a guardian for your minor or disabled children.
3. Establish a testamentary trust to avoid the cost and burden of a financial guardianship for a child’s share.
All estate assets and instruction in a will are subject to the probate process.
Jointly held assets, assets with a designated beneficiary such as life insurance and retirement accounts, and assets held in a living trust are not part of a will. Therefore, are not part of the probate process.
Why should a single person set up a Living Trust?
If you have a trust, and you become mentally or physical unable to act for yourself, guardianship proceedings are eliminated, as your pre-nominated successor Trustee will act on your behalf.
Can I add to or make changes to a trust that I have created?
If your Trust is a Revocable Living Trust, yes, you can make changes. If it is an Irrevocable Living Trust, No, you can not. It is permanent.