Frequently Asked Questions
What is a Living Trust?
A Living Trust is a legal document that looks a lot like a Will. In fact, it does what most people think a Will does – and much more. Because there is no probate with a Living Trust, most of the expensive court proceedings and delays are eliminated, your privacy is preserved, and emotional stress on your family is minimized. It can reduce/eliminate estate taxes, is extremely hard to contest, may provide investment and estate management during your lifetime, and it even provides very effective pre-nuptial protection. A Living Trust does not reduce state inheritance taxes.
I Have a Will, Why Would I Want a Living Trust?
Contrary to what many people believe, a Will may not be the best way to distribute your estate because a Will does not avoid probate. Additionally, a Will goes into effect after you die, and therefore provides no protection against physical or mental incapacitation where you could end up under the control of the orphan’s court.
If I Have a Living Trust Do I still Need a Will?
Yes, you should have a “pour over” Will in the event that you forget to retitle any property in the name of your trust. The Will “catches” the property and “pours over” into your trust after your death. The property may have to go through probate first, but at least it can then be distributed as part of your overall plan.
What is Probate?
Probate is the legal process through which the court makes sure that, when you die, your debts are paid and your property is distributed according to your Will. If you don’t have a Will, the state in which you live has written one for you.
What's So Bad About Probate?
It’s expensive. Legal/executor fees and other costs are usually estimated at 4 times or more of an estate’s gross value (before debts are paid). It takes time – often 1-2 years or longer. During part of this time, the assets are usually frozen so an accurate inventory can be taken. Nothing can be distributed or sold without the court and/or executor’s approval. Your family has no privacy. Probate files are open to the public so anyone can see what you owned and whom you owe. Your family has no control. The probate process has control.
How Does a Living Trust Avoid Probate?
With a Living Trust you transfer all of your property from your individual name to the name of your trust, which you control – such as from “John and Mary Smith, husband and wife” to “First Community Trust, Trustee for the John and Mary Smith Trust dated May 3, 2001. Legally you no longer own anything (everything now belongs to your trust), so there is nothing to probate when you die. While the concept is simple, this is what keeps your assets out of probate.
Should an Attorney Draft My Trust?
Absolutely – preferably one who specializes in Estate planning. An experienced attorney can provide valuable guidance and assistance for your situation and assure the legal documents are prepared properly. Avoid generic “do-it-yourself” form books; they can’t address every family’s unique needs.
Is a Living Trust Expensive? And How Long does it take?
No! Especially when compared to the costs of probate. How much you pay will depend on how complicated your plan is, the type and amount of your assets, and if you need additional tax planning, etc. Be sure to ask for an estimate in advance. It should only take a couple of weeks for your attorney to prepare the legal documents after you make the basic decisions.
Is it Hard to Transfer Property Into My Trust?
Not really, but titles must change on real estate (local and out-of-state) and other property with titled ownership (checking and savings accounts, stocks, CDs, insurance, mutual funds, etc.).
Should I Consider a Corporate Trustee?
Although you can be trustee of your own trust, many people select a corporate trustee, such as First Community Trust, especially if they don’t have the time, ability or desire to manage their own investments. Corporate trustees are in the business of managing trusts – they are reliable, objective, government regulated, experienced investment managers, and they outlive individual trustees. Fees are very reasonable. In addition to professional asset management, First Community Trust can pay your bills (rent, utilities, charge cards, etc.) and collect your social security and pension benefits.
Do I Lose Control of The Property in My Trust?
Absolutely not! You keep full control over your property. You can do everything you did before – buy and sell property, make changes, even cancel your trust at any time (remember, it’s revocable). Nothing changes but the names of the assets.
What Does a Successor Trustee Do?
At physical or mental incapacity, your successor trustee manages affairs for as long as necessary, using your assets to pay your expenses. When you recover, you automatically resume control. At your death, your successor trustee manages your financial trustee, pays your debts, and distributes your property according to your instructions.
If I Become Incapacitated, Who Has Control?
If you select a corporate trustee as your trustee or co-trustee, they will continue the management of your trust for you.
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