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How Your Family Can Benefit During
Your Disability
or at Your Death from
the Creation and Asset Funding of a
Revocable Living Trust or Inter Vivos Trust or Grantor Trust While You Are Still Alive
"Put not your trust
in money, but rather put your money in trust" recommended Oliver Wendell
Holmes, one of America's most famous U.S. Supreme Court Justices.
Definition or Meaning of the Legal Term "Revocable Living
Trust"
or "Inter Vivos Trust" or "Grantor Trust"
"A revocable living trust is an arrangement
you make for management and distribution of your property. Like a will, the
trust is "revocable," meaning that you can modify or eliminate it at any
time. These trusts are established by a written agreement or declaration
which appoints a "trustee" to administer the property, and which gives
detailed instructions on how the property is to be managed and eventually
distributed. If you want your trust to substitute for probate (court
administration of property after death) or for guardianship (court
administration after incapacity), you must give the trustee detailed
instructions about how to handle these situations, and you should legally
transfer substantially all of your property to the trustee. A revocable
living trust agreement or declaration is usually longer and more complicated
than a will, and transfers of assets to the trustee can be time-consuming
and expensive."---Washington State Bar Association,
http://www.wsba.org/media/publications/pamphlets/revocable.htm
Advantages of Utilizing a Revocable Living Trust,
Inter Vivos Trust, or Grantor Trust for Your Estate Planning
Read in
detail about revocable
living trust advantages as contrasted with the
probating of will,
court guardianship,
or
a power of attorney,
or joint ownership.
Properly drafted and implemented for both husband and wife, fully-funded
"AB"
revocable living trusts, inter vivos trusts, or grantor trusts can save substantial federal estate taxes at the
death of the second spouse-to-die if the husband and wife's separate living trust agreement divides up the
trust assets of the first-spouse-to-die's trust into what is called an A
"marital deduction" trust and a B "residuary" trust (which
is equal to the maximum amount of the federal estate tax exemption in
existence in the year of death) that pays income only to
the surviving spouse, and which is thus free (pursuant to the Internal
Revenue Code) of federal death taxes at the death
of the second spouse. The A trust pays no federal estate taxes in
going unrestricted to the surviving spouse because assets go estate tax-free
transfer from the first spouse to die to his or her surviving spouse. Such sophisticated estate planning is usually only
worth the couple's consideration if the present or future net worth of the
spouses exceeds at least two million US dollars. Read more about Federal Estate Tax-Saving
AB Revocable Living Trusts. When a decedent has left a will or last testament to dispose of his or her
assets at death, the ensuing results after death are very much different
than the decedent ever expected to happen. The stipulated will heirs or
beneficiaries only receive their inheritance after everyone else is paid in
full, such as creditors, tax collectors, a probate attorney to take the will
through the complicated and time-consuming probate administration process,
accountants, appraisers, probate court fees, and more, especially if the
decedent died owning assets in his or her personal name in several different
provinces and/or nations across the USA, Canada, the Caribbean, Mexico,
Central America, South America, Asia, Australia, New Zealand, Africa, the
Middle East, and/or Europe. Similar expenses and problems will arise if a
person dies having left no last will and testament. A person who dies
without leaving a will or trust is said to have died “in testate.”
To put your family first in receiving your assets at your death,
use a
revocable living trust, intervivos trust, or grantor trust that is self-managed by you as the trustee during your life,
but which becomes irrevocable at your death, and which is managed after your
death by your trust agreement-designated successor trustee or successor
co-trustees. Most people name themselves as the trustee or co-trustees
in charge of managing their trust's assets. Thus, even though your assets
have been put into the trust, you can and will remain in total and complete
control of your assets during your lifetime.
Trust Funding: Putting Your Assets Into Trust Ownership Right Now
After you have written and
signed the revocable living trust agreement, you will transfer legal title
to all (or most) of your assets into the ownership of the trust so that you
die with nothing or little in any your name to go through the hassles,
expenses, and time delays otherwise encountered in the probate process.
Transferring title or ownership of your assets into the name of the trust is
known as "trust
funding".
Thus, to take full advantage of the benefits of an inter vivos trust, the
settlor must change the titles on ALL real estate, securities, and other
assets from his or her individual name to the name of revocable living
trust.
The Trust Settlor or Grantor Usually Serves as the Trustee
Usually the settlor or grantor serves as the initial trustee and the primary
beneficiary of a revocable living trust. In that way, the grantor does not
give up any control of the assets placed in the trust. There are also no
U.S. federal income tax consequences because while the grantor is alive, he
or she reports all trust income on his/her own individual federal income tax
return form number 1040. In addition, all trust bank and stock brokerage
accounts are established under the grantor or settlor's own social security
number. Trust investment income is reported on the grantor's personal income
tax return 1040. When two or more co-trustees serve, the trust instrument
may provide that either trustee alone may act on behalf of the
trust---especially important if one of the trustees becomes incapacitated.
The assets of the trust continue to be administered beyond your death by the
person or persons you have named to be the successor trustee or trustees.
The trust can also provide that during your serious
disability that the
successor trustee can administer the trust assets on your and your family's
behalf during your period of disability. The entire process is private,
non-public, confidential, and very much dedicated to the exclusive
well-being of your family.
In addition to achieving the above objectives, the administration of your
estate through a trust is private and confidential---quite a contrast to the
public process of probate that makes your family’s assets very much known to
any con man or con woman who wants to fleece your heirs of their
newly-inherited wealth---what ever is left over after the probate process.
What is meaning or significance of "revocable"
in the legal term "revocable living trust"?
Because the grantor or settlor usually reserves
the right in the trust agreement to amend or revoke the trust at any time
during his or her lifetime, the "revocable:" aspect of the
revocable living trust is that the grantor or settlor can change any terms of the trust
agreement at any time prior to his or her death, or even terminate the trust
outright and transfer the trust assets back into his or her individual ownership.
This enables the grantor to revise the trust (or even terminate the trust)
to take into account any change of circumstances such as marriage, divorce,
death, disability or even a "change of mind." It also affords the grantor
the peace of mind that he can "undo" what he has done. Upon the death of the
grantor, most revocable living trusts become irrevocable and no changes are
then allowed.
Who's Who in a Revocable Living
Trust?
- ►Grantor,
Trustor, or Settlor the person who sets up or establishes
the trust.
►Trustee (or Co-Trustees)
this is the person who will manage the trust assets. This also may be the
settlor
in a Revocable Living Trust, in view of the fact that the settlor usually
wants to manage his or her own property. Often revocable living trusts are
called "self settled trusts" when the grantor is also a beneficiary of the
trust. The trustee is a fiduciary, which means he or she holds a
position of strict and high trust and confidence. The trustee must follow
strict responsibilities and very high standards as to how the trust is
managed for the sole benefit of the beneficiaries.. For example, the
trustee cannot use your trust's assets for his or her own personal use or
benefit without your explicit, advance, and written permission. Instead,
the trustee must hold and use trust assets and trust income solely for the
benefit of the trust's beneficiaries.
- ►Successor Trustee. Where
the settlor is a trustee, the successor trustee (or successor co-trustees)
is the person who will manage the trust assets after the settlor dies, or
in the event that the settlor becomes physically or mentally
incapacitated. Upon the settlor’s death, the successor trustee will
immediately have the same powers that the settlor had as trustee to
manage, buy, sell, borrow against, or transfer the trust assets. In
addition, the successor trustee has the legal duty and obligation to
distribute the trust’s assets in accordance with the settlor’s directions,
as provided in the writing of the trust instrument. Because the revocable
living trust becomes irrevocable at the death of the settlor or settlors,
the successor trustee does not have the legal right or power to alter the
terms and provisions of the trust. The successor trustee has the right,
duty, and obligation to manage the trust assets for the sole benefit of
the successor beneficiaries. At the settlor’s death, the successor trustee
automatically takes over without court order, pays any debts, expenses and
taxes directed to be paid by the terms of the written trust document, and
then distributes the property to the surviving, successor trust
beneficiaries.
- ►Beneficiaries are the
people who will receive the benefit of the trust’s assets and trust
income. The settlor is often the original beneficiary. At the death of the
settlor, the persons receiving the benefit of the trust are called
"successor beneficiaries".
In addition to having a revocable living trust to own your assets while you
are alive, you should also establish a
pour
over will, living will,
durable power of attorney for
financial matters, and a durable power of
attorney for health care. Read more about
Living Trust
Benefits.
For more information about the benefits of utilizing a revocable living
trust, please email Phillip Fry,
Certified Tax Consultant. You should also read these living trust
information web pages---
[Links-Estate-Planning]
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