LIVING TRUST

  A Living Trust is a written document established during your lifetime that holds your real and personal property for the benefit of one or more other persons during your lifetime, and which disposes of your property upon your death. A Living trust may be amended or revoked during your lifetime. A Living Trust becomes irrevocable upon your death.

     For example, you establish a Living Trust, and transfer ownership of your personal and real property into the trust for your benefit during your lifetime, and for the benefit of your spouse, children, or other individuals upon your death.

     A Living Trust provides several financial advantages: maximum control of your assets; asset protection; a source of retirement funds; elimination or reduction of income, gift, estate, and inheritance taxes; and avoidance of a court probate proceeding; but only when you allow an irrevocable trust or business entity to be the owner of your Living Trust.

     A Living Trust has one or more Trustor(s), Trustee(s), and Beneficiary(s). The Trustor creates the trust, and transfers money or other assets into the trust. The Trustee manages and invests the money and assets owned by the trust. The Beneficiary receives the money and assets placed into the Living Trust. During your lifetime, you serve as the Trustor, Trustee, and Beneficiary of your Living Trust. Upon your death, one or more individuals become Trustee(s) and Beneficiary(s) of your Living Trust.

     We’ll examine two types of Living Trusts: an individual living trust; and a marital or joint living trust.

Individual Living Trust

      With an individual Living Trust, during your lifetime, you serve as the Trustor, Trustee, and Beneficiary of your Living Trust for all property you transfer into your Living Trust. Upon your death, any property not transferred into your Living Trust during your lifetime will be inherited by your chosen Beneficiary(s) according to the terms of your Pour-Over Will. Your Living Trust may be amended or revoked while you are alive. Your Living Trust becomes irrevocable upon your death.

Trustor

     You serve as the sole Trustor of your Living Trust during your lifetime. A Trustor is also referred to as a Grantor or Settlor. As the Trustor, you establish the Living Trust and transfer money and assets into the Living Trust. As the Trustor, you can also amend or revoke your Living Trust. In the event you become mentally disabled, your Living Trust will be managed according the individuals designated in your Financial Power of Attorney and Health Care Power of Attorney.

Trustee

      You serve as sole Trustee of your Living Trust during your lifetime. As the Trustee, you manage and invest the money and assets transferred to your Living Trust, and you distribute the money and assets in your Living Trust to yourself as the named Beneficiary of your Living Trust. You also designate individual(s) who will serve as your Successor Trustee(s) upon your death.

Beneficiary

     You serve as the sole Beneficiary of your Living Trust during your lifetime. As the Beneficiary, you receive the money and assets transferred into your Living Trust. You also designate individual(s) who will serve as Successor Beneficiary(s) upon your death. You can designate individuals, religious and charitable organizations, educational and non-profit institutions, and foundations. Your Successor Beneficiaries receive the trust assets upon your death according to the terms of your Living Trust: immediately without restrictions; only for health, education, medical, and support; in incremental years, such as 1/3 at age 21, 25, 30; or at designated years, and percentages each year, such as 10% per year for 10 years.

Specific Gifts

  In addition to the Successor Beneficiary(s), you can give specific gifts to individuals and entities upon your death. A gift includes money, and real and personal property, such as a home, personal possessions, vehicles, stocks, bonds, collections, and art work.

Marital / Joint Living Trust

     With Marital Living Trust, during you and your spouse’s lifetimes, you both serve as Trustors, Trustees, and Beneficiaries of your Living Trust for all property you transfer into your Living Trust. Upon your death, any property not transferred into your Living Trust during your lifetime will be inherited by your chosen Beneficiary(s) according to the terms of your Pour-Over Will. You Living Trust may amend or revoke during your lifetimes. Upon the death of the first spouse, the decedent spouse’s ½ share of the Living Trust becomes irrevocable, but the surviving spouse’s ½ share of the Living Trust remains revocable. Upon the death of the second spouse, both spouses’ Living Trust becomes irrevocable.

Trustor

      You and your spouse serve as the sole Trustors of your Living Trust during your lifetimes. A Trustor is also referred to as a Grantor or Settlor. As the Trustors, you both establish the Living Trust and transfer money and assets into the Living Trust. As the Trustors, you both can amend and revoke your Living Trust during your lifetimes. In the event you or your spouse become mentally disabled, your Living Trust will be managed according to the individuals designated in your or your spouse’s Financial Power of Attorney and Health Care Power of Attorney.

Trustee

   You and your spouse serve as sole Trustees of your Living Trust during your lifetimes. As the Trustees, you both manage and invest the money and assets transferred to your Living Trust, and you both distribute the money and assets in your Living Trust to yourselves as the named Beneficiaries of your Living Trust. You also designate individual(s) who will serve as your Successor Trustee(s) upon your deaths.

Beneficiary

      You and your spouse serve as the sole Beneficiaries of your Living Trust during your lifetimes. As the Beneficiaries, you both receive the money and assets transferred into your Living Trust. You both designate individual(s) who will serve as Successor Beneficiary(s) upon your deaths. You both designate each other first, and you’re your children second. However, you can designate other individuals, religious and charitable organizations, educational and non-profit institutions, and foundations.

     Upon the death of the first spouse: In the normal case where a husband and wife designate the other as their Beneficiary, each spouse must decide how his or her ½ share of the money and assets in the Living Trust will be distributed to the surviving spouse in the event he or she dies first. The first decedent spouse can decide to give his or her ½ share of the Living Trust to the surviving spouse outright and immediately, or over time based upon an ascertainable standard. The reason for this choice is to satisfy the needs of the surviving spouse and children. If a surviving spouse is given outright and immediate access to the decedent spouse’s ½ share of the Living Trust, the surviving spouse may spend that ½ share during his or her lifetime, or give it away to a future spouse or individual during the surviving spouse’s lifetime, and thus diminish the children’s inheritance upon the death of the surviving spouse. If a surviving spouse is given the decedent spouse’s ½ share of the Living Trust over time based upon an ascertainable standard, such as for health, education, medical, and support, or income and interest but no principal, the decedent spouse can help insure that some of his or her ½ trust share will still be available for the children’s’ inheritance upon the death of the surviving spouse.

     Examples of how a husband or wife may choose to give away their ½ share of the Living Trust assets upon their death include:

(1) Give my ½ share of the Living Trust immediately to my spouse without any restrictions or limitations.

(2) Give my ½ share of the Living Trust to my spouse only for health, education, medical, and support during her lifetime.

(3) Give my spouse only the income and interest from my ½ share of the Living Trust and not the principal.

(4) Give my spouse the income and interest from my ½ share of the Living Trust, and only the greater of 5% or $5,000 of the principal every year.

(5) Give my ½ share of the total living Trust outright to my spouse over the course of time (example – 10% per year, every other year, every five years, every ten years, etc):

(6) Give a percentage of my ½ trust share to my children, and my spouse. Give these percentages according to the above option(s) for my spouse (example: 2, or 2, 3, 4 above or some other choice), and the options I designated below under “Upon the death of both Spouses” for my children.

Specific Gifts

  In addition to the forgoing named Beneficiaries, each spouse can give a specific gift to an individual upon their death or the death of both spouses. A gift includes money, real property, and/or personal property, such as a home, household possessions, vehicles, stocks, bonds, and mutual funds. Each spouse can designate the same or different gifts.

Upon the Death of Both Spouses

     A husband and wife must decide how the money and assets in the Living Trust will be distributed to their chosen Beneficiary(s), who are normally their children, after the death of both spouses. A husband and wife can decide to give his or her ½ share of the Living Trust outright and immediately, or over time based upon an ascertainable standard, to their chosen Beneficiaries such as their children, other individuals, religious organizations, or charitable institutions. The reason for this choice is to make certain their money and assets are spent wisely. For example, if a husband and wife give their children outright and immediate access to the money and assets in the Living Trust, their children may spend that money foolishly on extravagant automobiles, clothes, jewelry, vacations, etc. However, if the children are given the money and assets in the Living Trust based upon an ascertainable standard, such as for health, education, medical, and support, or income and interest but no principal, or at certain ages or incremental years, a husband and wife can help insure their children’s inheritance is spent wisely for their particular needs and not only for their desires. As the famous investor Warren Buffet once said: “Give your children enough assets that they can do anything, but not too many assets that they end up doing nothing.”

     Examples of how a husband or wife may choose to give away the remaining shares of the Living Trust assets upon the death of the second spouse include:

(1) Give beneficiary inheritance outright and immediately without restrictions or limitations.

(2) Give beneficiary only money for health, education, medical, and support.

(3) Give beneficiary inheritance over course of time (example – 1/3 immediately, 1/3 in 5 years, 1/3 in 10 years; or at age 25, 30, and 35).

Institution Beneficiaries

  In addition to the forgoing named individual Beneficiaries, each spouse can designate the same or different religious institutions and charitable organizations.