What is a Trust?
A trust is a contract between the creator (you) and a trustee. The trust contract becomes “Living” so to speak when assets are retitled in the trust name.
Q: Can I act as my own trustee?
A: Yes. If you are competent to handle your financial affairs now, there is no legal reason why you can’t be the trustee of your own living trust. In fact, most living trusts have the people who created them acting as their own trustees. If you’re married, you and your spouse can act as co-trustees.
Q: What can I do with my assets once they’re in my Living Trust?
A: If you’re the trustee, you can do anything you want with the assets. When you set up your living trust, you are transferring the title of all your assets from you as an individual to yourself as the trustee of your trust. You then must manage the property for the benefit of yourself as the beneficiary. What this means is that you will have absolute and complete control over all the assets of your trust. If you want, you can spend, save, invest or even give the assets away at your discretion. There are no restrictions on what you can do with the assets in your living trust. Moreover, if you don’t like the terms of the trust, you can amend it or revoke it at any time without penalty.
Q: Will my Living Trust avoid income taxes?
A: No. The purpose of creating your Revocable Living Trust is to avoid living probate, death probate, and reduce or eliminate federal estate taxes. It’s not a vehicle for reducing income taxes. In fact, if you’re the trustee of your living trust, you will file your income tax returns in exactly the same way you filed them before the trust existed. There are no new returns to file and no new liabilities are created.
Q: If I transfer real estate into my Living Trust, will my property taxes go up?
A: No. Transfers into your living trust have no effect on your property taxes.
Q: If I’m only a part owner of property, can I transfer my share into a Living Trust?
A: Yes. Your share can go into the trust without changing the interests owned by others.
Q: Can I name Trustees and Beneficiaries who live out of state?
A: Yes. There is no limitation on where your trustees or beneficiaries must reside.
Q: Will I have to consult an attorney every time I buy new assets?
A: No. Once your current assets are transferred to your living trust, you take title to all new assets in the name of the trust and they will automatically be owned by your trust.
Q: Does my Living Trust need to be registered or recorded anywhere?
A: No. Your living trust is a private document which is not recorded. However, if you own interest in real estate, the new deeds showing trust ownership will be recorded.
Q: Can I sell assets owned by my Living Trust without complications?
A: Yes. You sell assets in the same way you currently do. You will, however, add the word “Trustee” after your signature.
Q: Can I change the terms of my Living Trust?
A: Yes. While you’re alive and competent, you can alter your living trust or even revoke it without penalty at any time.
Q: Can I transfer real estate into my Living Trust?
A: Yes. Generally, real estate should be transferred into your living trust. Otherwise, upon your death, there will be a death probate in every state where you own real property. When it’s owned by your living trust, there is no probate anywhere.
Q: Is my Living Trust just a tax loophole that the government will close down?
A: No. Your living trust has been authorized by the law for centuries. The government has no interest in making you go through a living probate or a death probate. Those proceedings only clog up the court system. The only portion of your trust that will be affected is the amount in excess of the allowable federal estate tax exemption.
Q: Can any attorney create a Living Trust?
A: No. The drafting of your living trust should only be done by an attorney trained in the area of tax and trust law. It’s important that you seek out a law firm which limits its practice to the creation and administration of living trusts. After all, your trust will be the document which manages and disposes of all your hard earned wealth. Make certain you choose a law firm that is both qualified and experienced.
Q: What if I move to another state, is my Living Trust still valid?
A: Yes. Your living trust is valid in all 50 states, regardless of the state where it was originally created.
Q: Is a Living Trust only for the rich?
A: No. A living trust can help anyone who wants to protect his or her family from unnecessary probate fees, attorney’s fees, court costs and federal estate taxes.
Q: Is a Living Trust a good idea for a single person?
A: Yes. If you’re widowed, divorced, or unmarried, a living trust offers protection for your estate, as well. It will completely eliminate a living probate, a death probate and you can pass up to the federal exemption amount free of federal estate taxes.
Q: Are there any major disadvantages to a Living Trust?
A: No. Because YOU HAVE COMPLETE CONTROL OF ALL ASSETS IN YOUR TRUST, you’re free to manage your living trust in any way you want. Also, because your living trust is revocable, you have the right to make any changes to it while you’re alive and competent.