What Is A Trust?
A trust is a fictitious legal entity that owns assets for the benefit of a third person (beneficiary). The Grantor of the Trust is the person who set up and gave money to the Trust. The Trustee of the Trust is the person charged with keeping the assets safe, invested properly, and finally distributed to the Beneficiary at the proper time.
The Grantor can pretty much decide how the money must be kept (in interest bearing accounts, in real estate, or only in government insured FDIC accounts, etc.), and when it may be distributed (when the beneficiary is 18 years old; or one half when the beneficiary turns 18 and the other one half when the beneficiary turns 21, etc.). The Grantor of the Trust can also be the Trustee of the Trust, if the Grantor decides to set the Trust up in such a manner (e.g., Grantor sets him/herself up to be the Trustee of a Trust for his/her child).
If I Set Up A Living Trust, Do I Still Need A Will?
Yes. Your Will serves as a backup for assets that you either don`t or are not able to transfer to your Living Trust. Any asset not transferred to the Trust will not pass under the terms of the Trust document. However, in your Will, you can include a clause that names someone to inherit assets that you haven`t left to anyone else. If you don`t have a Will, any asset that isn`t transferred by your Living Trust will go to your closest relatives in an order determined by state law. These laws may not distribute your assets in the way you would have chosen. The Will is how you can assure that your assets that are not covered under the Trust are distributed according to your wishes.
When is Probate Necessary?
When a person dies, their "non-probate" assets will automatically pass by law to designated beneficiaries without court supervision or intervention. Non-probate assets include life insurance, living trusts, retirement accounts, joint bank accounts or bank accounts with named beneficiaries, payable on death (POD) accounts, and "joint tenancy" property. All other assets titled solely in the decedent's name at death like household and personal items, bank accounts, stocks, automobiles, and real estate are considered "probate assets," and must be administered in a probate proceeding.
What is an AB Trust?
Many people are afraid that if their spouse passes away they will face a hefty tax bill. However, spouses can set up an AB trust. An AB trust is a type of irrevocable trust that while technically passing on the property to the couple’s children, the surviving spouse can actually live and use the assets. After the surviving spouse passes, the assets will transfer to the children.
The benefit of the AB trust is to keep a portion of the taxable estate in an irrevocable trust which allows the children to receive a much larger amount of assets than they would otherwise. However, setting up an AB trust can be somewhat complicated because the limits of the surviving spouse are limited by the IRS’ rules.
If the surviving spouse exceeds the IRS’ rules, then the AB trust may be deemed to be illegal. Because of the complexities of setting up an AB trust, it is best to work with an attorney who specializes in estate planning.
What Is An Advance Directive?
An Advance Directive enables you to guide your family and physician if you are unable to communicate with them. It allows you to control the extent to which lifesustaining medical measures will be used and can help you protect your loved ones from being forced to make those difficult decisions. A Living Will is NOT a property will. A Healthcare Proxy is a person you appoint to make medical decisions for you if you are unable to make them for yourself. This person may make decisions that are not clearly stated in your Advance Directive.
What Is A Durable Power Of Attorney For Health Care?
The durable power of attorney for health care is a document that allows you to name another person to make certain medical decisions for you if you are unable to make them for yourself. This is a very important estate planning tool. A regular power of attorney generally terminates automatically if the principal becomes incapacitated, unless it is specifically made to be durable.
Does It Make Sense To Use An Estate Planning Attorney?
Only an attorney who regularly practices in the fields of wills, trusts, probate and estate planning is able to provide you with really sound legal advice as you put your estate plan into place. Attorneys are subject to regulation by state bar organizations, many of which have continuing education requirements and mandatory liability insurance in case the lawyer makes a mistake. When you speak with an attorney, you can get answers to your questions including how much it would cost.
Often the expense incurred in retaining an attorney to prepare and help you put an estate plan into place is worth hundreds of times what you and your family would pay with no planning or poor planning. It would also avoid the financial and emotional nightmares that can occur with a poorly drafted (or improper) plan.
Speak to an Experienced Trusts Attorney Today
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified trusts lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local trusts attorney to discuss your specific legal situation.