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Typically estate planning language is similar from one attorney to the next. This makes it easier for any estate attorney to assist with amendments and courts to interpret documents.
How long do Living Trusts last? Most Living Trusts terminate a few years after the passing of the last named beneficiary unless language in the Trust states otherwise. This feature allows the Living Trust to manage and distribute assets long after the Trustor (creator of the Trust) has passed.
How often do Trusts need updating? Trusts often include language to automatically adopt new tax and estate laws.
It is still a good idea to review your Living Trust every few years to ensure the following:
- Recently acquired assets are in the Living Trust's name
- Beneficiary, successor Trustee and powers of attorney clauses still accomplish your goals.
Common Living Trust questions
Who controls the Trust? By creating the Trust, you are the Trustor who controls all language and appointments in the documents. By appointing yourself Trustee you control all the assets in the Trust, meaning you do not lose control of your assets. Married couples typically share control as Co-Trustors and Co-Trustees.
Revocable or irrevocable? If you want the ability to make changes to your Trust, you will want your Trust to be revocable. Most families create Revocable Living Trusts. Estates over the estate tax limit of $2M in 2008 or $3.5M in 2009 can use Irrevocable Trusts to reduce the tax impact on their beneficiaries.
Can Trusts be changed after the Trustors pass? Trusts become more or less irrevocable after the last Trustor passes. Successor Trustees can manage the assets in the Trust but they are unable to change the language of the Trust or veer from the Trust's instructions.
What happens when the Trustor(s) moves? When you move, you will find states offer reciprocity and you will not need to recreate your Living Trust. Some states have a registration process, so contact an estate planner in your state to inquire about the process.
Can unmarried couples create a Living Trust? Unmarried and same-sex couples can create what are typically called Common Law Trusts. Family members, such as brothers or sisters, are unable to create Living Trusts but other estate planning tools such as Family Limited Partnerships can be used for estate tax purposes.
Assets typically transferred to a trust: Property, bank accounts, vehicles and non-titled assets such as furniture, art, jewelry, etc.
Assets not in the trust but naming the trust as a beneficiary: Life insurance, annuities
Assets kept away from the trust: Retirement accounts, such as IRA's and 401k's. Consult your financial advisor.
Learn more about the roles of Trustors and Trustees or how to transfer assets to a Living Trust.
Trustors and Trustees
Why talk about both on the same page?
Most people, when setting up a living trust, name themselves as both the Trustor(s) and Trustee(s). When people do so, they maintain control of both the language/appointees of the trust and their assets (bank accounts, properties, vehicles, etc.) just as before they created a living trust.
What do Trustors do? Also known as Grantors or Settlors.
Trustors create the living trust, appoint Trustees, Successor Trustees, Beneficiaries, etc., and set distribution instructions.
Trustors are the ONLY ones who can amend (make changes) the living trust or revoke (terminate) the living trust.
How do Trustors make changes?
Amendments are typically required to change legal language or change appointees.
If both Co-Trustors are living, then both Co-Trustors must sign any amendments. A surviving spouse can amend the trust after the first spouse has passed.
Trustors can add and remove most assets from their living trust without changing any language in the trust. Titled assets, such as property and bank accounts, are added by naming the living trust as the owner. When Trustor(s) pass That is the trigger for distribution of the estate. At this point, the trustees or successor trustees take over and follow the deceased trustors' rules for distribution of the estate.
What do Trustees do?
Trustees are the daily managers of all assets in the trust. All transactions must be in the best interest of the Trustors.
Prior to creating a living trust, you have managed your assets in your best interests. By naming yourself both Trustor and Trustee of your trust, you are legally stating you'll be managing your assets in your own best interests. Couples usually name themselves Co-Trustees.
Typical daily activities of Trustees include:
- Putting money in a bank
- Withdrawing money from a bank
- Purchasing groceries for the Trustor(s)
- Buying / selling real estate, cars, etc.
- Borrowing / lending money
- Purchasing insurance
- Any financial activity you engage in regularly
When initial Trustees are incapacitated or are no longer living
When the initial Trustee(s) can no longer actively manage the Trust, Successor Trustees temporarily take over management of the trust. They must act in a fiduciary manner, managing assets in the Trust according to the rules of the Trust and in the best interests of the Trustors.