This is part 4 of the blog series entitled “Understanding Living Trusts: How You Can Avoid Probate, Save Taxes and More FAQ” discussing frequently asked questions about living trusts, probate, taxes and more.
What does a successor trustee do?
If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you automatically resume control. When you die, your successor trustee pays your debts and distributes your assets. All this is done quickly and privately, according to instructions in your trust, without court interference.
Who can be successor trustees?
Successor trustees can be individuals (adult children, other relatives, or trusted friends) and/or a corporate trustee. If you choose an individual, you should name more than one in case your first choice is unable to act.
Does my trust end when I die?
Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the person or corporate trustee you selected, until your beneficiaries reach the age(s) you want them to inherit. Your trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, ex-spouses and future death taxes.
How can a living trust save on estate taxes?
If you die in 2006 and the net value of your estate (assets minus debts) is more than $2 million, federal estate taxes must be paid on the excess at a rate of 46%. If you are married, your living trust can include a provision that will let you and your spouse leave up to $4 million estate tax-free to your loved ones, saving up to $920,000 in taxes.
Doesn’t a trust in a will do the same thing?
Not quite. A will can contain wording to create a testamentary trust to save estate taxes, care for minors, etc. But, because it’s part of your will, this trust cannot go into effect until after you die and the will is probated. So it does not avoid probate and provides no protection at incapacity.
Is a living trust expensive?
Not when compared to all the costs of court interference at incapacity and death. How much you pay will depend on how complicated your plan is.
How long does it take to get a living trust?
It should only take a few weeks to prepare the legal documents after you make the basic decisions.
Should I have an attorney do my trust?
Yes, but you need the right attorney. A local attorney who has considerable experience in living trusts will be able to give you valuable guidance and peace of mind that your trust is prepared properly. In some states, qualified paralegals can now also prepare trust documents; however, they cannot give you legal advice.
If I have a living trust, do I still need a will?
Yes, you need a “pour-over” will that acts as a safety net if you forget to transfer an asset to your trust. When you die, the will “catches” the forgotten asset and sends it into your trust. The asset may have to go through probate first, but it can then be distributed as part of your living trust plan.
Is a “living will” the same as a living trust?
No. A living trust is for financial affairs. A living will is for medical affairs; it lets others know how you feel about life support in terminal situations.
Are living trusts new?
No, they’ve been used successfully for hundreds of years.
Who should have a living trust?
Age, marital status and wealth don’t really matter. If you own titled assets and want your loved ones (spouse, children or parents) to avoid court interference at your death or incapacity, consider a living trust. You may also want to encourage other family members to have one so you won’t have to deal with the courts at their incapacity or death.
For additional questions about trust law, speak with our experienced Living Trust Lawyer in Los Angeles today.