Q. What is the catch of a Living Trust?
A. There is no catch about a Living Trust. This tool has been used in different forms in more than 400 years. With a well-established Living Trust, the problems that people have usually doesn’t concern the Trust at all. For example, issues might occur when property or assets are not included in the Trust because the owner failed to transfer the title to the Trust. Once it is set up, a Trust is very easy to manage. The only time when you don’t need a Living Trust is if your estate value is less than the minimum limit for Probate, which is typically about $30,000.
Q. If I transfer my estate into a Living Trust, will my property be reappraised and is there any chance I would have to pay more property taxes?
A. Not at all! According to Revenue and Taxation Code 62, there is no reevaluation of the estate for tax purposes when it is transferred into a Revocable Living Trust.
Q. How to title property and accounts?
A. Usually, the property will be titled in the Trust name as seen in the following example:
Joe and Sarah Robinson Family Trust,
Dated _____20__ Joe and Sarah Robinson, Trustees
Q. Is it possible to add or sell assets in the Living Trust?
A. Yes, it is. The Trustees can add or sell assets in the Living Trust without changing it. The owner and trustee have entire control of the property and has the authority to do anything they want to the property.
Q. Should I add another person as a co-owner of my property or accounts?
A. Adding some one else, such as your child or a parent, to the title of your assets can be a dangerous move. The decision will defeat the purpose of the Living Trust and can potentially put you at risk of a lawsuit. Usually, adding a person to the account or estate title will allow them to avoid probate period and allows them to be in charge of the property if the owner is incapable of managing it. Having a Living Trust already allows you these purposes after you name the person as a trustee. This way, the person has the power to take over upon your dead or incapacity, but while you are still in charge, their personal liabilities, such as divorce, debts, or lawsuits, will not have any effect on the property.
Q.Will I be able to avoid taxes and litigation using a Living Trust?
A. No, you won’t. Your Living Trust can be revoked by you any time you want. Therefore, in case of lawsuits or taxation, you will have no protection from it. A tax return for your Trust is not required. You will enjoy other protection, however. To learn more about other options to protect your property from other liabilities, get in touch with our specialists.
Q. When should I review my Living Trust?
A. Usually you should review at the Living Trust once every year with the same person who set it up for you. Update is recommended when it doesn’t represent your exact wishes any more. Changes in your situation, including marriage, divorce, death, or birth can also call for an update of your Trust. If a successor Trustee or Guardian is no longer fit for their roles, you can also change to someone else. By making an amendment to the Trust, you are able to change the heirs or successors at any time and without the help of a lawyer.
Q. How can the Trust be funded?
A. To transfer your assets into the Trust, you can simply changing the title of your assets from your name to the Living Trust’s name. Assets you can transfer include savings accounts, stocks, mutual funds, annuities, bonds, life insurance, or real estate. By doing this, you will avoid the Probate process required for your assets.
Q. Should I also have a Will beside a Living Trust?
A. You can have a “Pour Over Will”. With this, all your assets will automatically be transferred into your Living Trust at the time of your death, in case you forgot to put them in the Trust in the first place. These assets will be transferred after going through Probate.
Q. Can my children be Trustees for my Living Trust?
A. Yes, they can as long as they are not minor children. You will be the Trustee until you pass away, and your children can take the position afterwards.
Q. What is an A-B Living Trust?
A. It is a Trust for married couples. In an A-B Living Trust, you and your spouse will each have a statement of your separate assets. With this Trust, you can increase your Estate Tax exemption to twice as much when the second spouse pass away, from $ 1 million to $2 million in 2011.
Q. Are Living Trusts recognized in all the states?
A. Yes, it is actually legal in all countries that are using English Law. You will not have to change or update your Trust when moving across state borders. In some states, some documents should be worded in a certain way, but the documents in your trust will not be invalidated.
Q. When will a Living Trust end?
A. After you pass away and your trustees have distributed all your assets, the trust will be no longer there. If your assets are to be retained in the trust and to be distributed over a period of time, the trust will not end until the time you specified in the trust documents, or until everything is distributed. Depends on the specifications of your wishes, it could takes decades to end the Trust.
Q. Can the assets in the trust be sold or bought under the Trust name?
A. Yes, it is possible to carry out transaction under the name of the Living Trust. As the Trustee, you are allowed to control your asset and are able to trade or transfer the assets as you wish.
Q. Can anyone contest my Living Trust?
A. In most cases no. Unlike a Will, a Living Trust has certain writings that is very difficult to challenge. If an heir is not satisfied with what they are to receive, and decide to contest, they will lose everything! A former spouse will not be able to break a trust either, after the assets have been transferred to the fund.
Q. Is there any tax return I need to file for a Living Trust?
A. No, you will only need to file a personal tax return like usual. A Living Trust is revocable and doesn’t have a tax identification number or its own tax return. As mentioned above, you will also not have to reassess your estate for tax purposes at the time of transferring it to the trust.
Q. With a Living Trust, are my assets still liable to creditor attachment?
A. No. A Living Trust has a spendthrift clause, that means you are protected from creditor attachment of assets in your Trust at the time of your death. However, a Living Trust doesn’t protect against judgments or lawsuits.