More Information

How Does The Living Trust Plan Work?
We draft a living trust agreement for you, appointing yourself as the trustee. Your property is then transferred into the name of the trust. In your lifetime, the trust is merely a title-holding arrangement. You are its sole owner, manager and beneficiary: without limitation you can do anything you desire with your property. That's why it's called "revocable." At your death, however, it becomes irrevocable, communicating your explicit instructions for your successor trustee to follow in distributing your estate. Since the living trust only takes effect when you die, other documents are required to convey your intentions in the event that you become incapacitated: the living will and durable powers of attorney for health care and financial matters. These documents appoint whomever you select, instructing them to make these decisions on your behalf, according to your instructions.

Why Are Trusts So Popular Now?
The living trust answers an important need in these times of personal control and responsibility. You have worked long and hard for your assets. You will to be able to control them, in spite of the unexpected. If you become incapacitated, the trust and accompanying documents speak for you. When you die, your trust alone speaks for you -the probate court and taxing authorities will not usurp and direct your estate as they do when probating wills. With a living trust there is no outside interference - your estate continues on. Your successor trustee carries out your instructions. For married people, upon the death of one spouse, the living trust sets up a separate trust (holding that deceased spouse's estate), allowing that spouse's directives to be preserved and reaping optimum death tax savings.

What Are Its Advantages?

• A living trust is similar to a will in that it directs the transfer of your property at death. However, unlike a will, probate isn't necessary to transfer assets to your beneficiaries.
• Transfer of your estate by trust saves time and expense by avoiding probate.
• Trusts simplify distribution of assets at a difficult time for loved ones.
• Without a probate, challenges to the trust by potential heirs and creditors are less likely.
• You can change or revoke your living trust at any time for any reason.

More On Taxes
The primary tax benefits are realized by the married couple. Through the use of a trust, a married couple obtains optimum death tax savings. In essence, when one spouse dies, instead of the value of that deceased spouse's estate being added to the surviving spouse's estate for tax purposes, it is placed in trust and given its own $2,000,000 exemption, with the surviving spouse also retaining his or her own $2,000,000 exemption. This estate-splitting confers the best tax result upon the surviving spouse's death.

How Do I Begin?
When you are ready to proceed, please follow these steps:
1. Complete the enclosed Questionnaire.
2. Call to set up an appointment with Marilyn D. Sullivan.
3. Bring the filled-out Questionnaire with you when you come in for the consultation, along with copies of the last statement from your asset accounts requiring transfer and copies of deeds for real estate.

After your consultation, should you desire to proceed, upon payment in full of your document charges we will prepare your documents within one month. We will mail you drafts of your documents to peruse at your leisure. If changes are to be made, please call us and we will revise them. When the documents are finalized, an appointment will be set up for you to come in and sign them.

Questions and Answers

Q: Why are trusts so popular now?

You're in charge during your lifetime. You've worked long and hard for your assets, and you want to be able to control them, no matter what unexpected circumstance comes along. Your living trust and its accompanying documents provide for this important need. During your lifetime you manage your assets as you choose, just as you did before establishing your trust. Your living trust effectively doesn't take over until you die. In the event of mental or physical incapacity during your lifetime, the financial and health care powers of attorney which accompany your trust ensure that your own specific financial and medical instructions are meticulously followed during a time when you yourself cannot make these decisions.

You're still in charge after death. You don't want the probate court and the taxing authorities usurping and directing your estate after your death. Instead, your appointed successor trustee steps in upon your death and distributes your assets exactly as you have specified in your trust - without interference by the court. The instructions you previously laid out are meticulously followed - and no one may change the trust or your instructions contained in it.

Optimum tax benefits for married couples. For married people, upon the first spouse's death the living trust sets up a separate trust within itself so that the taxing authorities cannot assess their death taxes until after the surviving spouse has died. This mechanism usually saves the surviving spouse substantial taxes at death - more about this below in the section entitled Tax Advantages for Married Couples.

Q: Why a trust instead of a will?

Having a living trust avoids probate. A will must be probated through the probate court. A living trust avoids probate altogether, distributing your assets directly and without delay to your chosen beneficiaries..

A will is inconvenient for your heirs. With a will, your loved ones, already burdened by your passing, must now hire an attorney to get your estate probated.

A will probate is an expensive process. With a will, the probate code instructs your estate to pay set costs and fees to the attorney, the executor, the court and the probate referee. These fees average 8% of your estate.

Probate causes prolonged delays in distribution of assets. The probate process takes time; it never takes less time than six months and sometimes takes years.

A living trust assures that your distribution of assets will be confidential. All court filings are open to the public. Filing your will with the court, which is necessary in probate, causes your very confidential instructions to become public record. With a trust your privacy is assured.

Tax Advantages for Married Couples

Taxation without a trust. Each spouse is entitled to his or her own $2,000,000 death tax exemption. However, when one spouse dies, the assets which the surviving spouse receives from the deceased spouse are added to the surviving spouse's assets. So, when the surviving spouse dies, his or her estate will include the deceased spouse's assets - and the surviving spouse's heirs will be taxed on any value above $2,000,000.

Deferred taxation and increased exemption with the living trust. With a living trust in place, the deceased spouse's property is not deemed to have passed to the surviving spouse. Instead, the deceased spouse's property is split off into one or two separate trusts, under the umbrella of the original trust, which are not taxed until the surviving spouse dies. And, at the death of the surviving spouse, that spouse gets his or her own $2,000,000 exemption - while the deceased spouse's separate trust gets its own $2,000,000 exemption. Thus, the married couple has retained both of their two $2,000,000 exemptions - instead of increasing the surviving spouse's taxable pot. This, in itself, can be the optimum tax-related advantage of the living trust.

Q: Are there other advantages to a living trust?

Other advantages to spouses: But the advantages don't stop there. A living trust also allows the first spouse to die to make irrevocable gifts out of his or her estate that cannot be changed by the surviving spouse. A lot can happen in the time between two spouses' respective deaths. A living trust protects against unwanted depletion or diversion of the deceased spouse's assets, and preserves the beneficiary designations of the spouse who is first to die. All the while, the surviving spouse is able, if so desired, to receive all income of the deceased spouse's trust, and the principal, if needed.

Q: What does a living trust change during my lifetime?

The only thing which changes is the name under which you hold title to your assets - that's all. You pay tax on all income generated by the trust. You prepare your tax return just the way you have always done. This is because you and your trust, in the eyes of the law, are one during your lifetime.

Also, always remember that your living trust is revocable in part or in whole at any time while you are alive. That's why it is called "revocable." Absent your death or incapacity, your living trust truly has no significance except as a manner of holding title.

Q: Why should I transfer my assets into my trust?

Once you've established your living trust, transferring your assets into the name of the trust is of great importance - because when you die, your successor trustee can only distribute those assets which you have placed in the trust. Since we cannot predict when our deaths will occur, it is important to take this step at the time when the trust is set up. We do this for you at a nominal cost; or, you may take this step yourself.

Because of Federal law, transfer of an IRA or Keogh into a living trust might be considered a premature distribution; thus, we do not transfer these plans into the living trust. However, the living trust is added as a secondary beneficiary designation.

Q: Why doesn't a living trust have to be probated like a will?

Probate of a will. Probate is mandated by law for assets that no longer have a living owner. In essence, the probate court attempts to patrol your estate and make sure the instructions in your will are carried out. But this results in delays in the distribution of your estate, and depletes your assets due to fees statutorily provided to attorneys, executors and probate referees. The original intent of the probate code was to provide guardianship for a deceased person's property, but the realities of the probate process itself render the price of such court scrutiny unduly expensive and complicated.

Your living trust is exempt from probate. When your assets are placed in a living trust during your lifetime, then upon your death the living trust continues on. Your assets are viewed by the law as still having a "living" owner: the trust itself. Court involvement is not required, since your trust is still "alive" - administered by your successor trustee, who distributes your assets as you have instructed. It is the continuation of title that makes assets in your living trust exempt from probate.

Q: How does a living trust work?

We prepare a Living Trust Agreement and transfer your assets into the trust. A handy schedule listing your trust assets is attached to your living trust. With this list, you may change the assets in your trust estate yourself, at any time, without an attorney. Your living trust is completely revocable - hence the name "revocable living trust." You can designate a gift to a beneficiary at one time, and later decide to take it away. You can transfer an asset into the trust, and later take it out. You're in charge of your trust because you appoint yourself as the initial trustee during your lifetime. Your manipulation and control of all assets in the trust, as well as their tax status, remains completely identical to the way it was before your trust was established.

When you die, however, everything changes. The trust comes into legal operation, and the successor trustee you've designated takes over according to the terms you've specified in your trust. The property in your trust is then distributed by the trustee directly and without delay to your named beneficiaries.

For married couples, the estate of the first spouse to die may be wholly or partially distributed at the time of that spouse's death; otherwise, it remains in a separate trust within the framework of your living trust agreement, usually (but not always) with the remaining spouse as trustee. However, once the first spouse has died, the terms governing this new separate trust containing his or her assets cannot be altered or revoked in any way - the deceased spouse's assets remaining in trust will be distributed exactly as he or she has designated, upon the second spouse's death.

Q: Will I save taxes?

You will not save on income taxes. Legally, you and your trust are one, and are taxed identically during your lifetime. However, at your death certain tax advantages become available through the structure of the trust - advantages which may decrease and/or suspend death taxes, depending upon the size of your estate. The living trust is set up to reap maximum death tax benefits, should your estate reach the qualifying size. In that event, your trust document delivers those benefits.