Protect your family
with a living revocable trust
or grantor trust
The grantor trust or living revocable trust is the best estate planning tool and
plan for successful individuals and families in the USA, Canada, Mexico, Central America, South America, the
Caribbean,
Asia, Australia, New Zealand, the Middle East, Africa, or Europe.
When a person writes and signs a will (or die in testate with no will) to distribute
his or her assets
to heirs at death, the heirs stand last in line to receive from the
decedent's estate after it has been
significantly cut by federal estate taxes, state inheritance taxes,
probate administration and court fees, and probate lawyer's fees. Read about
California
probate expenses and time delays, and how to eliminate them with a
California
living revocable trust.
Enable your family to go to the head of the line to receive your estate
assets by creating and funding a
living revocable trust (sometimes misspelled as "revokable living trust) with you as the sole trustee, or as one of the
co-trustees, during your life. A trust is a legal arrangement where one
person (known as the "trustee") controls property given by another
person (known as the "grantor" or "trustor" or "settlor")
for the benefit of someone else (known as a "beneficiary").
The trust
becomes irrevocable upon your death and it is managed by your
trust-designated
successor trustee(s) for the benefit of the successor beneficiaries.
After your living trust has been
established, you fund it by transferring the title or ownership paperwork of all of your
estate assets into the ownership of the trust so that at your subsequent
death, you die owning no assets to go through the expensive, public, and time-consuming probate
process.
To put your home and other
real estate into
trust ownership, you will prepare and then file (e.g., Recorder of Deeds
Office) a quit claim deed from you and any other current deed owners to you
as the trustee for your specific trust name (e.g., to Joseph Jones, Trustee,
Joseph Jones Trust). Obtain the help of a local real estate or trust
attorney to prepare proper, recordable deeds.
A funded living revocable
trust helps your memory to live on in the minds of your heirs who are saved
from having to suffer through the expensive, time-consuming, and
bureaucratic probate process.
Bank accounts, stock brokerage accounts, stocks and bonds, mutual funds, and
all other grantor/settlor assets must also be in the name of the living
trust. One big step forward for living trust bank accounts is that the FDIC
now provides the owner of a living trust bank account with
FDIC
insurance up to $100,000 per living trust beneficiary. Providing
$100,000 of FDIC coverage per trust beneficiary is much more
protective than just providing $100,000 per trust bank account.
What is a living revocable trust or a grantor trust? Revocable means “able to be
ended or changed at the maker’s discretion.” Living trust means legally
“an inter vivos (among the living) trust that is established and funded
during the settlor’s (creator’s) life.” A trust is an “entity that holds
assets for the benefit of certain persons.” This category of trust is also
known as a revocable living trust, living trust, inter vivos trust, or
grantor trust.
Who serves as trustee or co-trustee?
Thus, if you set up a living revocable trust, you are usually the trustee
or co-trustee (with another family member, if desired) during your life,
with a designated successor trustee(s) such as your surviving spouse,
responsible adult children, a family friend, or a bank trust department to
take over the trust administration during your serious disability or at your
death. Any individual you select as a
co-trustee (to serve with you) or successor trustee (upon your incapacity or
death) should be, honest, careful in the spending of money, capable, honest,
and trustworthy. Your adult family members may or may not be selected by you
depending upon your circumstances and their abilities to serve as effective
trustees.. You should also consider designating a bank trust department to
serve as the trustee or co-trustee in situations in which there is no worthy
and capable individual family members or close family friends.
Who are the trust beneficiaries? You (and spouse, if desired) are the beneficiary while you are alive.
The trust agreement specifies who the successor
beneficiaries are---and when and in what amounts they are to receive trust
income and assets after your death. If their are young heirs as
beneficiaries, it is often best for the trust to distribute the trust
principal to them in several installments beyond your death---such as at
their ages 25, 30, and 35.
What are the disadvantages of a living
trust?
►Higher initial costs. You will usually spend
more time, money, and effort to create the living trust entity and to
transfer your assets into the ownership of the living trust than you would
expended to have a will prepared.
►To successfully avoid probate administration of your
assets, you must keep your assets in trust ownership, including property of
all types acquired after you create the trust.
►You may have to deal with more effort, complexity, and
explanation in transferring or selling assets or making purchases with
trust checks. In addition, banks, lenders, stock brokerage firms, stock
transfer agents, real estate title guarantee and real estate closing
companies, or others may want to see and photocopy the trust agreement in
order to determine and document that the trustee has sufficient trustee
powers of authority to do what is required (e.g., borrow money against a
trust property).
►Upon your incapacitating disability or after your
death, the effective management of your trust assets will depend upon the
honesty and management ability of your successor trustee who may act without
court control, approval, or involvement.
► Your trust may have to pay trustee's fees and
expenses if you use a third party as trustee, including the costs of filing
an annual trust income tax return. If you are the grantor-trustee of a
revocable living trust, there is no need for a separate trust federal income
tax return 1041 (USA). Instead, the trust income and tax deductions are
included on the grantor-trustee's annual 1040 federal income tax return
(USA). |
