Page 6 - Estate Planning 101 - 201312

Q&A PREPARING A TRUST

What is a Revocable Living Trust? A Revocable Living Trust (Trust) is a legal document or “Living Entity” that allows an
individual or couple to transfer ownership of real property and/or assets (such as a
home, real estate, bank accounts, certificates of deposit, securities, life insurance, stocks,
bonds, etc.) from personal ownership into the legal ownership of the trust. A Revocable
Living Trust is just what the name implies, a document that is created during an
individual or a couple’s life, but that can be changed or terminated at any time. A Trust
allows the trustors/grantors (the individual or couple setting up the trust) to decide who
will receive their assets, how much they will receive, and when they receive it. A Trust
allows the trustors/grantors to choose their successor trustees, who their beneficiaries
are and appoint guardians for any minor children.
If a Revocable Living Trust is set up correctly and all of the property and assets are
properly transferred to the trust it will provide the following benefits: Avoid probate
entirely; distribute property and assets to the beneficiaries almost immediately; ensure
any minor or disabled children are cared for; handle financial affairs if someone
becomes incompetent; and save money in federal estate tax and capital gains taxes.

Unfortunately, about half of all people who have living trusts never complete the
funding process, which practically negates the advantages of setting up a trust.
“Funding” is another way of saying “Transferring” assets to the Trust. This is discussed
in more detail on the next page.
Who will be in charge of distributing The successor trustee handles the business affairs and distribution of the estate after the
my assets in a Trust? trustors/grantors death. The successor trustee could be one or more person(s) or
entities, such as a bank or trust company. The successor trustee is usually a trusted
friend or family member. A successor trustee locates the Trust after the trustors/
grantors death; files an inventory and appraisal of the property; pays any creditors,
taxes, and fees; distributes the assets to the beneficiaries. Before selecting a successor
trustee, the responsibilities need to be discussed with the individual or couple to see if
they are willing and able to perform these duties. It is also a good idea to name
an alternate successor trustee if, for any reason, the first choice cannot serve.
Can I control where my assets go in a One huge advantage of a Revocable Living Trust is the control that the trustors/
Trust? grantors have on when, where and how the assets are to be distributed. For example: If
a John and Jane Doe do not want their beneficiaries receiving an outright distribution
of the assets until they reached the age of 25, this could be stipulated in a Trust. This
does not mean that the beneficiaries cannot use the money until they are 25, it simply
means that the Successor Trustee(s) will be managing those assets until the beneficiaries
reach the age of 25. Prior to reaching the age of 25, the assets may be used for health,
education, maintenance and support.

In a Trust, the beneficiaries are the people and/or organizations to which the assets are
left. Most people have a pretty good idea of who their direct beneficiaries will be.
Beneficiaries may be children, grandchildren, other family members, friends, charities,
organizations, etc. Couples in second, or subsequent marriages may face more
complicated decisions if there are children from a prior marriage.
Who will care for my Minor Children? Parents with children under the age of eighteen (18) have two estate planning concerns.
The first is providing for the custody of their children should both of them die at the
same time. The second concern is nominating a conservator to supervise and manage
any assets the child would inherit. The same person may fulfill both roles, or one
individual may be named as the children's guardian and another as financial manager
or conservator. The individual or couple that is selected cannot serve as legal guardian
or conservator until approved by the court. It is always a good idea to name alternate
guardians and conservators for minor children in case the first choice is unable to serve.
Providing care and support for children with a disability is also very important. Parents
must choose a personal guardian to be responsible for the disabled child. Additionally,
the parents must choose a financial manager to supervise any money or property they
leave for the care of the disabled child for as long as the child lives.
ESTATE PLANNING 101