FAQ’s on Living Trusts

What is a “Living Trust”?

A trust is merely an agreement (i.e., a “contract”) between two parties, the person establishing the trust (the “settlor”) and the person holding the property (the “trustee”), to hold property for the benefit of another (the ”beneficiary”). In a typical living trust situation, these three legal “persons” are, in actuality, the same person (i.e., you). The term “living trust” merely means that the trust is established and funded during your lifetime rather than being a trust which is described in your will (a “testamentary” trust) and which must go through probate to be created and funded. In order for a trust to be a valid, binding instrument all that is necessary is for the parties executing it to have the legal capacity to enter into a contract (i.e., age and competency) and for the trust to actually own something (the “corpus”). In our trusts, we initially “fund” the trust with $10 to make it effective (you don’t actually have to transfer the $10) and then you can assign, deed and transfer your other assets into the existing trust (including your real property). Once the trust is signed, dated and acknowledged by a Notary Public, it is in full force and effect; neither the trust nor the Will need to be recorded or filed with any governmental entity (although the deed transferring real property is usually recorded with the County Recorder).

That is all that is needed; a trust does not need to be created by, reviewed by or signed by an attorney. It is always a good idea however to let your successor trustee know that the trust exists and where you keep the original documents. Our documents all utilize the same underlying templates and language as the software which we market to attorneys through-out the country. The documents are specific to each state and all of the language was drafted by attorneys who are certified specialists in Estate Planning, Trust and Probate Law.

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Don’t I need to have an attorney prepare my “Living Trust”?

NO.  Anyone can actually prepare a “Living Trust.”  You could actually buy your own software program or go online and prepare a “Living Trust” yourself.  According to California law however, if someone is going to prepare your “Living Trust” and charge you a fee to do so that person must be an attorney or a Legal Document Assistant (LDA).  Furthermore, only an attorney can provide legal advice.  A Legal Document Assistant on the other hand, can assist you in preparing your return, help to make sure all forms are accurately completed, and provide a valuable resource with personal contact.

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What is a Legal Document Assistant?

Legal Document Assistants (LDAs) were once commonly known as Independent Paralegals.  However, as of January 1st, 2000, only those Paralegals working directly for attorneys may now be referred to as Paralegals. Those formerly known as Independent Paralegals are now officially known as Legal Document Assistants (LDAs).

LDAs often have the same educational background as a paralegal and are REQUIRED by law to be registered and bonded in the county in which they have their principal place of business.

California law known as SB1418 authorizes non-lawyers to prepare legal documents for people doing their own legal tasks.  Effective January 1, 2000, these non-lawyers, called Legal Document Assistants, may:

    • Distribute to their customers legal materials that have been published or approved by a lawyer
    • Prepare the customers’ legal documents under the direction of their customers
    • File the customers’ legal documents in the appropriate courts

To qualify as a Legal Document Assistant, a person must:

    • Register with each County in which they work
    • Post a $25,000 Bond
    • Establish that he or she has a minimum level of experience and/or education.
      Every Legal Document Assistant is required to use a Contract.  The Contract will provide appropriate notice to the Legal Document Assistant’s customers regarding the scope of the customers’ rights and the Legal Document Assistant’s duties.

This Bill was passed for your protection.  When you look to hire a Legal Document Assistant be sure to ask if he or she is bonded and registered.

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Why would I hire a Legal Document Assistant to prepare my “Living Trust”?

A Legal Document Assistant may be a great alternative for someone who doesn’t want to pay the high fees that an attorney would charge, but is concerned about attempting to prepare their own Living Trust without any experience.

When chosing to work with me, I will be completely honest and upfront with you. If at anytime during the process I feel that your estate plan requires legal intervention, I will gladly refer you to an attorney who would be happy to assist you.

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Why do I need an estate plan?

Most of us spend a considerable amount of time and energy in our lives accumulating wealth. With this, there comes a time to preserve wealth both for enjoyment and for future generations. A solid, effective estate plan ensures that your hard-earned wealth will remain available for your care and will remain intact when it passes to your beneficiaries, instead of being siphoned off to government processes, attorneys and bureaucrats.

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How much does a complete estate planning package cost?

If you went to an attorney, especially an experienced attorney who specialized in estate planning, you could expect to pay from $1,200 to $2,500 as an individual and from $1,500 to $3,500 as a married couple.  Even the cut-rate or discount firms, with their “cookie-cutter” forms, would charge you from $700 to $1,200.  With BRYAN SCHURTER, INC. you get the same quality estate plan as you would expect from an estate planning specialist for $795 for an individual and $995 for a married couple.

Be careful if/when you do any price comparisons.  Many sites “quote” one price for the trust but then charge you separately for the other necessary documents.  You can pay well over my price without realizing it.  My price is for the complete estate plan!

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If I don’t create an estate plan, won’t the government provide one for me?

YES. But your family may not like it. The government’s estate plan is called “Intestate Probate” and guarantees government interference in the disposition of your estate.  Documents must be filed and approval must be received from a court to pay your bills, pay your spouse an allowance, and account for your property–and it all takes place in the public’s view. If you fail to plan your estate, you lose the opportunity to
protect your family from an impersonal, complex governmental process that can become a nightmare. Then there is the matter of the federal government’s death taxes. There is much you can do in planning your estate that will reduce and even eliminate death taxes, but you don’t suppose the government’s estate plan is designed to save your estate from taxes, do you? All estate planners agree that dying without an estate plan should be avoided at all costs.

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What’s the difference between having a will and a “Living Trust”?

A will is a legal document that describes how your assets should be distributed in the event of death. The actual distribution, however, is controlled by a legal process called probate, which is Latin for “prove the will.”  Upon your death, the will becomes a public document available for inspection by all comers.  And, once your will enters the probate process, it’s no longer controlled by your family, but by the court and probate attorneys. Probate can be cumbersome, time-consuming, expensive, and emotionally traumatic during a family’s time of grief and vulnerability. Con artists and others with less-than-pure financial motives have been known to use their knowledge about the contents of a will to prey on survivors.

A Living Trust avoids probate because your property is owned by the trust, so technically there’s nothing for the probate courts to administer. Whomever you name as your “successor trustee” gains control of your assets and distributes them exactly according to your instructions. There is one other crucial difference: A will doesn’t take effect until your death, and is therefore no help to you during lifetime planning, an increasingly important consideration since Americans are now living longer.  A Living Trust can help you preserve and increase your estate while you’re alive, and offers protection should you become mentally disabled.  Please note that even with a Living Trust you should still have a complementary will (known as a “pour-over will”; this type of will makes sure that any assets which may not be in your Living Trust at the time of your death “pours-over” to the trust so everything is distributed pursuant to the terms of your Living Trust.  Our Trust Package includes all of the necessary estate planning documents including the “pour-over will”.

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What’s the difference between having a “Living Will” and a “Living Trust”?

A “Living Will” is a document that describes your wishes regarding life support if you are ever in a terminal condition or irreversible coma (think Terri Schiavo). As mentioned above, a “Living Trust” deals with your assets (either in the event of incapacity or at death. Both are very important and necessary parts of a proper estate plan and both are included in our Trust Package.

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The possibility of a disabling injury or illness scares me. What would happen if I were mentally disabled and had no estate plan or just a will?

Unfortunately, you would be subject to “living probate,” also known as a conservatorship or guardianship proceeding. If you become mentally disabled before you die, the probate court will appoint someone to take control of your assets and personal affairs.   These “court-appointed agents” must file a strict accounting of your finances with the court.  The process is often expensive, time-consuming and humiliating.  A Living Trust will avoid this process because your assets are titled in the trust and you have appointed someone to act as the successor trustee of the trust if you are no longer able to act’ further, if you have created the appropriate Health Care powers, you have already given someone else the ability to make health care decisions on your behalf.  In short, with a properly drafted and complete estate plan, you can eliminate the “living probate”!

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I have heard that my old health care powers may be invalid; is this true?

MAYBE.  New federal regulations known as the Health Insurance Portability and Accountability Act (“HIPAA”) imposes strict privacy regulations on the disclosure of individually identifiable health information.  This necessitates the addition of specific release and consent authority in all health care powers before any health care provider (e.g., your doctor) can release medical information to your agents and interested persons.  This can often present a “Catch-22” situation: the powers of attorney are effective only on your incapacity, but if you are incapacitated how can you authorize the release of the information necessary to establish that you are incapacitated? Because HIPAA has no “grandfather” exceptions, previously executed estate planning documents may now be useless unless the documents specifically address the HIPAA requirements. The documents provided by most of the other on-line trust preparation services are not HIPAA compliant.  All heath care documents (and the living trust) included in our program are specifically HIPAA compliant and the HIPAA release provisions are made effective immediately.

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If I set up a Living Trust, can I be my own trustee?

YES.  In fact, people who create most Living Trusts act as their own trustees.  If you are married, you and your spouse can act as co-trustees. And you will have absolute and complete control over all of the assets in your trust.  In the event of a mentally disabling condition, your hand-picked successor trustee assumes control over your affairs, not the court’s appointee.

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Will a Living Trust avoid income taxes?

NO. The purpose of creating a Living Trust is to avoid living probate, death probate, and reduce or even eliminate federal estate taxes.  It’s not a vehicle for reducing income taxes.  In fact, if you’re the trustee of your Living Trust, you will file your income tax returns exactly as you filed them before the trust existed. There are no new returns to file and no new liabilities are created.

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Can I transfer real estate into a Living Trust?

YES.  In fact, all real estate should be transferred into your Living Trust.  Otherwise, upon your death, depending on how you hold the title, there will be a death probate in every state in which you hold real property.  When your real property is owned by your Living Trust, there is no probate anywhere.

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Does adding my child on title with me avoid probate?

YES. However, adding your children on title as joint tenants means that they are then co-owners of your property. This means that you need their permission to sell or mortgage your property. It also means that your property could be subject to the claims of their creditors. You may create unneeded liability and tax consequences upon your children. Finally, when you add your child on title as a joint tenant, you may be liable for gift tax, and if your child dies before you, your family may have to prove that your house should not be probated in their estate settlement.

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Is a Living Trust valid in all states?

YES, a Living Trust is valid in all fifty states, plus the District of Columbia; however, our program is only specific for forty-nine states, plus the District of Columbia. Sorry residents of Louisiana, but your Napoleonic Civil Law history makes your laws too unique for even as sophisticated a program as we offer.

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Is the Living Trust some kind of loophole the government will eventually close down?

NO. The Living Trust has been authorized by the law for centuries. The government really has no interest in making you or your family suffer a probate that will only further clog up the legal system.  A Living Trust avoids probate so that your estate is settled exactly according to your wishes.

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Isn’t a Living Trust only for the rich?

NO.  A Living Trust can help anyone protect his or her family from unnecessary probate fees, attorney’s fees, court costs and federal and/or state estate taxes.  Any person with an estate large enough to require probate (from $25,000 to $100,000 depending of the state) will derive meaningful benefits from a Living Trust.  Besides, how rich do you have to be to want your assets protected from an unnecessary court procedure in the event you become incapacitated; a conservatorship/guardianship is just like a probate except you’re still alive!

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I have minor children; what happens if I die?

One of the most important things you can do as a parent is to protect your children, especially when they are minors.  If you die, the Court will appoint a Guardian for any minor child; therefore, if you want to determine who that person will be, you need to designate your choice of the Guardian in your Will.  Without a trust, the Guardian will also take charge of the assets going to the child which will be under court supervision (with all of the costs and delays involved in that process).  With a trust, when minors are the beneficiaries, your designated successor Trustee can manage and invest the trust funds, free of the costs and restrictions that arise when the Court appoints the Guardian. Often times, the person you may want to raise your children might not be the best person to manage the assets; with a trust, you can have the duties split or you can have the same person performing both functions.  Additionally, with a trust, you can continue the management of a beneficiary’s assets to whatever age you desire; certainly beyond age 18 (the age at which ALL guardianships must terminate).  The management of a beneficiary’s asset in a trust can include disbursement of assets and/or funds in increments, according to your directions (e.g., 1/3 distribution at age 25, 1/3 distribution at age 30, and the balance at age 35).  Of course, during this period, the trustee can use any or all of the trust principal for the benefit of the beneficiary (e.g., education).

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Will a Living Trust save on “Death Taxes?

If your estate is subject to death tax (whether federal and/or state), the trust can save substantial taxes for a married couple (this savings is obtained by being able to use the exemption amount at each death instead of just at the death of the surviving spouse — see the next FAQ). However, a Living Trust will not save any death taxes for an individual (if your estate is above the tax exemption amount and it is not going to a spouse or a charity, it will be taxed whether it is in a trust or not).

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Will my estate have to pay any “Death Taxes?

Whether your estate will be required to pay any tax on your estate at the time of your death depends on a number of variables: (1) the size of your estate; (2) the beneficiaries of your estate; (3) the federal estate tax laws at the time of your death; and, (4) the laws of your state of residency at the time of your death.  Currently, an estate of under $5,000,000 does not have to pay any federal estate tax (although this exemption may be lowered to $3.5M and, in the absence of further legislation, will return to $1M in 2013); however, many states are creating a separate death tax to make up for the lost revenue since the federal government no longer shares any of the estate tax it collects.  Generally, any part of your estate going to a surviving spouse or to a qualified charity is exempt from the tax.  If your estate must pay tax, the federal rate is 35% (the rate for a state tax is generally much lower).  Please note, that the exemption and tax rate are subject to change; some Legislators have stated that they would like to see the Estate Tax return to the 2009 levels ($3.5M exempt and a 45% rate) and, in the absence of further legistlation, on January 1, 2013, the Estate Tax is due to return to the 2001 level of $1M exempt and a 55% rate!  While no one expects to see the return to the 2001 level, it is very possible that we will see a return to the 2009 level; this is why our software uses a $3.5M calculation as part of its “matrix” for selecting the best possible tax plan for your situation (if the exemption stays at the current $5M, there is no downside to using the lower number).

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If my estate will not have to pay any “Death Tax”, why do I need a Living Trust?

Saving on estate taxes (for a married couple) is just one of the benefits of a Living Trust.  If your estate is over your state’s “small estate” limit (usually $30,000 to $100,000 depending on the state), then your estate must go through the expense, delay and publicity of a court administered probate proceeding at your death if you do not have a Living Trust.  Further, death taxes have no bearing on the protection a Living Trust and the appropriate health care powers can provide in the event of your incapacity.

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Can I transfer US Saving Bonds to a Living Trust?

You can transfer United States savings bonds to a revocable living trust without any tax consequence. The transfer is made by having the bonds reissued in the name of the trustee. The form that must be used to make the transfer is Department of the Treasury Bureau of Public Debt, Form PD F 1851 E (Request to Reissue United States Savings Bonds to a Personal Trust). Complete instructions for reissuing the bonds are set forth in Form PD F 1851 E.

This form may be used to transfer all savings bonds, including Series EE, Series E, Series HH, Series H, and Series I. Use Form PD F1851 to describe the bonds. If more than 13 bonds are to be transferred, use Form PD F 3500 (Continuation Sheet for Listing Securities).

You should be aware, also, that your signature (as the bond holder) must be certified by a certifying officer, including authorized employees of insured depository institutions and corporate central credit
unions. For a complete list of certifying officers, see Department of Treasury Circular No. 300 31CFR Part 306. This is not the same as having your signature acknowledged by a notary public.

Since you will be transferring your savings bonds through the mail to a Savings Bonds Processing Site (there are five sites specified in the instructions), you should send them by registered or certified mail with a return receipt requested. This will give you some satisfaction that the bonds were actually delivered.

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I have a pet which I want to make sure is cared for after my death, can I do that with a Living Trust?

Our site allows you to create a “Pet Trust” as an option; this trust can be for a specific animal or animals or for whatever animals survive you. You can designate different trustees for the care of the pet and the amount allocated for the care of the animal. You will also have the option to designate a trust “enforcer”; that is a third party who has the right to make sure the funds are acting being used for the care of the animal.

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What should I consider before I begin?

You should decide on (1) who will be the successor trustee in the event of death or incapacity; (2) if you have minor children, who should be the Guardian; (3) who will make health care decisions for you if you cannot make them yourself; and, (4) how your estate will be distributed at your death.

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What happens if I want to proceed?

After deciding on some of the important questions that were mentioned in the previous question,

Contact Me!

The process only takes two appointments to complete.

In the first appointment, we’ll go over all your questions, and answer any questions or concerns you may have.  We’ll also go through the process of completing the necessary paperwork to begin the process.

Within two short weeks we’ll meet again and go over the entire Living Trust Document.  We’ll make sure that all the information is accurately contained in the documents.

During the second appointment, I will also provide you with specific instructions on how to properly “fund” your Living Trust – which is one of the most important things you need to do.

I will also follow up with you in the following weeks to assist you in any way I can.

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What if I need to make changes or the tax laws change?

As mentioned above, as part of the process, you will register with us; if there are any changes in federal and/or state law which may affect your trust, you will receive notification. When you finish the process, you will be entitled, upon request, to receive a password which will allow you to create a Restated Amendment at any time in the future. A Restated Amendment completely rewrites your estate plan so it will have all the new language if there have been any legal changes which would affect your trust and will allow you to implement any changes you need to make to keep your trust current. However, the Restated Amendment keeps your existing trust name and the date of the existing trust, so you do not need to re-title any of the assets already titled in the name of the existing trust. Normally, the cost of a Restated Amendment is the same as creating a new trust (which is, in effect, what it is); however, with the password you will be able to create the Restated Amendment, whenever you need to do so, for half of the currently offered price of the trust package.

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What do I have to do after I create a Living Trust?

Other than making sure that you title any newly acquired asset in the name of the Trust (full details are included in the Funding Instructions included in the Trust Package), the simple answer is “nothing”.  Once a trust is created and funded, it will continue on until it is revoked or it is distributed pursuant to its terms. There are no on-going costs or fees to establishing a Living Trust; nor are there any separate accountings or tax returns required (IRS Regulations provide that a revocable living trust uses the tax identification number — your Social Security Number — of the Grantor as its identification number and no separate tax returns should be filed for the trust).

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Although every attempt possible is made to ensure that the information contained here is accurate and current, this site makes no guarantees that the information above is not without error.  Always seek advice from a qualified professional before taking any action based on the information read here.  This site is for educational purposes only.  For more information, please read this websites legal disclaimer.