1. I have a will. Why would I want a living trust?
Contrary to what you've probably heard, a Will may not be the best plan for you and your family. That's primarily because a will does not avoid probate when you die.
Fortunately, there is a simple and proven alternative to a Will -- the Revocable Living Trust. It avoids probate, and lets you keep control of your assets while you are living -- even if you become incapacitated -- and after you die.
2. What is probate?
Probate is the legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your Will. If you don't have a valid Will, your assets are distributed according to state law.
3. What's so bad about probate?
4. Doesn't joint ownership avoid probate?
Not really. Using joint ownership usually just postpones
probate. With most jointly owned assets, when one owner dies, full ownership does transfer to the surviving owner without probate. But if that owner dies without adding a new joint owner, or if both owners die at the same time, the asset must be probated before it can go to the heirs.
Watch out for other problems. When you add a co-owner, you lose control. Your chances of being named in a lawsuit and of losing the asset to a creditor are increased. There could be gift and/or income tax problems. And since a Will does not control most jointly owned assets, you could disinherit your family.
With some assets, especially real estate, all owners must sign to sell or refinance. So if a co-owner becomes incapacitated, you could find yourself with a new "co-owner" -- the court -- even if the incapacitated owner is your spouse.
5. Do I lose control of the assets in my trust?
Absolutely not. You keep full control. As trustee of your trust, you can do anything you could do before -- buy and sell assets, change or even cancel your trust. That's why it's called a revocable
living trust. You even file the same tax returns. Nothing changes but the names on the titles.
6. If something happens to me, who has control?
If you and your spouse are co-trustees, either can act and have instant control if one becomes incapacitated or dies. If something happens to both of you, or if you are the only trustee, the successor trustee you personally selected will step in.
7. What does a successor trustee do?
If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you resume control. When you die, your successor trustee pays your debts, files your tax returns and distributes your assets. All can be done quickly and privately, according to instructions in your trust, without
8. Who can be successor trustees?
Successor trustees can be individuals (adult children, other relatives, or trusted friends) and/or a corporate trustee. If you choose an individual, you should also name some additional successors in case your first choice is unable to act.
9. Does my trust end when I die?
Unlike a Will, a trust doesn't have to die with you. Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age(s) you want them to inherit. Your trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries' creditors or spouses.
10. How long does it take to get a living trust?
It should only take a few weeks to prepare the legal documents after you make the basic decisions.
11. Should I have an attorney do my trust?
Yes, but you need the right
attorney. A local attorney who has considerable experience in living trusts and estate planning will be able to give you valuable guidance and peace of mind that your trust is prepared properly.
12. If I have a living trust, do I still need a Will?
Yes, you need a "pour-over" Will that acts as a safety net if you forget to transfer an asset to your trust. When you die, the will "catches" the forgotten asset and sends it into your trust. The asset may have to go through probate first, but it can then be distributed as part of your overall living trust plan. Also, if you have minor children, a guardian will need to be named in the Will.
13. Is a "living will" the same as a living trust?
No. A living trust is for financial
affairs. A living will is for medical
affairs; it lets others know how you feel about life support in terminal situations.
14. Who should have a living trust?
Living trusts can be helpful for people in 2nd marriages with children of either party not born of the current marriage.