14 Jul Estate Planning Frequently Asked Questions
Frequently Asked Questions About Wills, Trusts, and Estate Planning
1. What is a Revocable Living Trust?
A Revocable Living Trust is a popular alternative to wills and other estate planning tools. A Revocable Living Trust helps you maintain control of your assets while you are living and will determine who gets your property upon your death. A Revocable Living Trust is favorable to a will in that it doesn’t require probate and you can revoke or amend your trust anytime while you are still living.
2. Are there other names for a Revocable Living Trust?
A Revocable Living Trust is also known as a revocable trust, an inter-vivos trust, a living trust, a grantor’s trust, and a loving trust. Though there are many names a Revocable Living Trust goes by, the function of all of these trusts is essentially the same.
3. How are a Will and a Trust different?
A Will mandates probate, which means that your Will must be admitted into court and approved by a judge before you assets can be transferred. A Will is not kept private after your death, unlike a revocable trust. Both a will and a trust can be revised during your life, if your priorities have changed. However, a trust will allow you to skip probate and will also allow you to name young children as beneficiaries of the property. To learn more about the probate process, read on here.
4. What is an irrevocable trust?
An irrevocable trust is a type of trust that you cannot amend or revoke during your lifetime. This means that an irrevocable trust is permanent and cannot be changed.
5. Why does a revocable living trust help me to avoid probate?
During the process of creating a living trust, you will most likely transfer a significant portion of your assets into the trust and your trust will become the owner of those assets. When you die, your trust will distribute your assets to the beneficiaries you have listed in your trust.
6. Is a living trust a good option for a single person?
Yes! A living trust is always a good estate planning option if you are seeking to avoid probate and provide a quick transfer of your assets to your beneficiaries upon your death.
7. Does anyone need to read my living trust?
No, your living trust is a private document and you are not obligated to share it with anyone, even after your death. However, you may want to show your living trust to your beneficiaries and consult with them on the terms of the trust. By consulting with and explaining to your beneficiaries the terms of your trust, you are minimizing disputes and misunderstandings from happening after your death.
8. Where should I store my living trust?
Your living trust is a very important document and you should keep it in a safe place that will be easily accessible after your death. A fire box or safety deposit box would be good places to store your document; however, access to a safety deposit box can be limited after your death, so please plan for this if you store your living trust in a safety deposit box. Your attorney will keep a copy of your trust and may store your original copy for you upon request. Lastly, it is important to let your successor trustee know where your trust can be found!
9. What parties are in the living trust?
There are three different parties in a living trust. The settlor(s) are the creator(s) of trust. The trustee(s) are the people who will manage the trust after your death. The beneficiaries are the parties who benefit from the trust’s income and assets.
10. Can changes be made to my living trust after death?
Once the settlor(s) of the trust have passed away, the trust becomes irrevocable. This means that any successor trustees of the living trust may not make changes to the trust.
11. Does a bank or trust company have to be involved in my living trust?
A bank or trust company will only have to be involved if you choose them to be. Many people will choose to designate individual trustees; however, you can name a bank or trust company to be a trustee and manage your financial affairs.
12. What is a trustee?
A trustee is the person who will manage the Trust assets. The first trustee may be the creator of the living trust. Any following trustees will be named in the living trust and will be able to handle your affairs if you become disabled or die.
13. What is a Pour Over Will?
Sometimes assets are not transferred into your trust or it is simply not feasible to transfer all of your assets into your trust before your death. A Pour Over Will is different from a normal Will, because it directs the executor of the will to “pour over” any assets not included in your trust at the time of your death to your trust after death. However, any assets that are included in the Pour Over Will will have to be probated, so it is imperative that your major assets are transferred to your trust before your death. A Pour Over Will is simply a safeguard for any of your assets that were not transferred into your trust before your death.
14. If I place my home into my living trust, will it affect my mortgage?
No, transferring your home into your trust will have no effect on your mortgage and the mortgage company cannot “call” your mortgage early due to the transfer.
15. If I place my home into my living trust, will I still be able to deduct my mortgage interest from my taxes?
Yes, you will still be able to deduct your mortgage interest from your taxes because your living trust will have no effect on your income tax.
16. How does a living trust affect my income taxes?
A living trust will not affect your income taxes while you are living. You will continue to file your income tax as you normally do. However, after your death, your trust will have to pay taxes if it generates income. It is best to consult an attorney to find out how this applies to you and your living trust.
17. Can I avoid probate by using Joint Tenancy with Rights of Survivorship?
Yes! Joint Tenancy with Rights of Survivorship can be used to avoid probate upon the death of a spouse. Joint Tenancy with Rights of Survivorship will automatically transfer the decedent’s property to the living spouse upon the decedent’s death. However, when the living spouse dies the property will have to go through probate unless the living spouse puts the property into a living trust or designates a Transfer on Death Beneficiary. Joint Tenancy with Rights of Survivorship should not be confused with Joint Tenancy in Common, as Joint Tenancy in Common does not transfer the remainder interest of the property to the living spouse and the property will have to go through probate.
18. Does my living trust need to be updated?
Your living trust should be reviewed every 2 to 3 years to see if any changes need to be made to the document. Life circumstances can change and it is important that your living will reflect the changes that have been made in your life.
19. Does a living trust protect me from law suits?
Your living trust will not protect you from law suits.
20. Will my living trust protect me against creditors?
No, a living trust will not protect you from your creditors because it is fully revocable during your lifetime. If you are looking for creditor protection, consult with your attorney about a Legacy Trust or an Irrevocable Trust and which option is best for you.
21. Where do I file my living trust?
Living documents, unlike Wills, are private documents (even after death) and will never require registration or filing. If real property is sold in the name of the trust, the property’s deed will require a signature from the trustee and the deed will need to be recorded to show that the trustee had the power to sell the property.
22. Can I revoke or cancel my living trust?
Yes, a living trust is revocable at any time before your death. After your death, the living trust becomes irrevocable.
23. How does the distribution of a living trust differ from distribution of a will?
In a living trust, your assets are distributed by the successor trustee according to the instructions in your living trust. This means your assets can be distributed immediately and/or distributed at a later date. The distribution of a will is reliant upon the probate process and the probate process will immediately distribute your assets as stated in your will.
24. Can the assets in my living trust pay for my medical expenses or nursing home care?
Yes, the assets in your living trust are available to pay for your nursing home care and other medical expenses. However, if you intend to apply for medical assistance, the assets in the living trust will not be protected. If you are planning on applying for Medicaid then it is best to explore other Medicaid Planning techniques with an attorney. Medical assistance rules are very complex and it is important to consult with your attorney to determine what estate planning tool is best for your circumstances.
25. Can the assets contained in my living trust be sold?
Yes, the assets of your living trust can be sold. While you are living, you still have control of your assets in the living trust if you are the trustee, including buying, selling, or transferring the assets.
Authored by: Mary E. Zoldak
Columbus and Central Ohio Estate Planning Attorney
MacLaren Law LLC is happy to meet Columbus and Central Ohio’s Estate Planning needs. If you would like more information about Estate Planning please read our Estate Planning articles or visit the American Bar Association website. If you would like to schedule a meeting for help with your estate planning needs, please contact us today!