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Complete-It-Yourself Living Trust Kits

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Commonly Asked Questions About Living Trusts

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1. If I die leaving only a Will, how will my estate be settled?
2. How is my estate settled when I die without a Will?
3. What are the advantages of having a Living Trust?
4. Can I set up my own Living Trust?
5. What do I need to set up my Living Trust?
6. What property CAN I put into my Living Trust?
7. What property SHOULD I put into my Living Trust?
8. If I have a Living Trust, do I still need a Will?
9. Who should I name as Trustee?
10. Who should I name as Successor Trustee?
11. What do I do after I set up my Living Trust?
12. Where should I keep the Living Trust documents?
13. How can I change or revoke my Living Trust?
14. Do I have to file a tax return for the Living Trust?
15. Do I need to record my trust with any government agency?
16. Is a Living Trust valid in all 50 states?

1. If I die leaving only a Will, how will my estate be settled?

If you have a Will, you have likely named a Personal Representative (Executor) to distribute your property to your heirs. After you die, one of two things will happen depending on the value of your estate.

1. If your total estate is worth less than the minimum allowed by law (including all real estate), full probate can be avoided. For example the minimum amount in Arizona is $50,000; in California, it is $100,000. In Utah, if you own real estate, your estate must go through probate. If you do not own real estate, the minimum amount is $25,000. Your Personal Representative simply prepares an affidavit and, after waiting the statutory period, your property is transferred to your Beneficiaries.

2. If your estate is worth more than the legal minimum, your estate must go through the court process called probate. Your Personal Representative files a petition to begin the probate. It must be filed in the Probate Division of the court system in the County where you resided at the time of your death.

Then your Personal Representative must notify each of your heirs and Beneficiaries. He must have your estate inventoried and appraised. Next he must publish notice to your creditors, even if you have no creditors or if they aren’t known. Creditors have a certain period of time within which to file their claims against the Estate. (Arizona law allows creditors four months to file claims against your estate, Utah three months.)

When the court is satisfied that (1) all taxes have been paid, (2) all creditors have been paid, and (3) all challenges to the Will have been settled, the court will approve the plan to distribute your assets to your Beneficiaries.

Because of the time allowed creditors—and because of other probate procedures—your heirs can expect to wait from ten months to two years before your estate is settled and they receive your property.

Probate can be expensive. Because probate is complex, your Personal Representative will probably hire an attorney to follow the process to completion. Expenses include court costs, attorneys’ fees, and the cost of appraising the estate, contacting Beneficiaries, publishing notice to creditors, contesting any claims and defending any Will contests. Probate costs have ranged between $1,500 and $10,000, even for simple estates, and usually average between 5% and 10% of the value of the estate.

During probate, all of the information in the court files is a matter of public record. This means anyone, regardless of the reason, can go to the Probate court and look at your file. Anyone can see your assets, your liabilities and even the names of the heirs who will inherit your property. Families who value their privacy often find probate uncomfortable.
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2. How is my estate settled when I die without a Will?

If you die without a Will, your estate must be settled the same as if you had a Will. There is one difference: Since you have not named your personal representative, nor listed your Beneficiaries, the court appoints a personal representative and distributes your assets to your relatives, according to the state law, which may not be your wishes.
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3. What are the advantages of having a Living Trust?

A Living Trust allows you to have full use, enjoyment, and control over your property during your lifetime while defining what will happen with your estate upon your death or incapacity. This is especially true if you name yourself as Trustee.

In addition, the Living Trust avoids Probate. After your death, rather than going through Probate, your estate is distributed according to the terms you have set up in your Living Trust. The Successor Trustee (chosen by you) carries out this process.

You can avoid probate’s costs, time delays, and lack of privacy by setting up a Living Trust. You also avoid the dangers of joint tenancy ownership and the need to have the court appoint a conservator in the event of your incapacity.
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4. Can I set up my own Living Trust?

If you are of sound mind and at least eighteen (18) years of age, you can legally set up a Living Trust. The Trust should be in writing, signed by two people: the Settlor (you, the person placing property into the Trust); and the Trustee (the person you choose to be the Trust Asset Manager, which also can be you). These signatures should be signed in front of a Notary Public. Your Living Trust requires no additional witnesses.

However, the Pour-Over Will included with a Living Trust will need two or three witnesses (depending on your state’s requirement).
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5. What do I need to set up my Living Trust?

Decisions need to be made first. You will need to decide who will be the Trustee (usually yourself), who will be your Successor Trustee to act upon your incapacity or death, and who will be the Alternate Successor Trustee in case he cannot act. Also, a list of the beneficiaries and their addresses needs to be made.

To prepare to “Fund” your trust, you will need copies of all your deeds, bank statements, investments and insurance policies. This process takes on an average 20 to 30 minutes. So, although it appears time consuming, it really isn’t.
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6. What property CAN I put into my Living Trust?

Your Living Trust can hold a variety of property, including bank accounts, life insurance, copyrights, stocks and bonds, personal items, and real estate you now hold either individually or jointly with someone else. You designate as your Beneficiaries, those you want to receive this property when you die.

Your property will be listed on a Schedule, which is included with the Living Trust. When the property’s status changes — such as when you sell your home or close out an account—you should make a note next to the item on the schedule, include the date and what happened. For example, if you should sell your home, mark on the list, “Home sold 2-15-90.” Place your initials by any such notations.

If you have questions about your property and the effect of a Living Trust, you should consult with an estate planning attorney.
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7. What property SHOULD I put into my Living Trust?

You should put all of the assets you own, which would otherwise be subject to probate into your Living Trust. This will eliminate the probate of your estate upon your death, and the need for a “conservator” to be appointed by a court in the event of your incapacity. Even property you and a spouse own in joint tenancy with right of survivorship should be retitled in the name of the Trust. This will avoid problems if both of you should die or become incapacitated.

You may want to leave your household checking account and automobiles out of your Trust. A checking account with the name of your Trust on your checks may be a little less convenient at the grocery store. And, automobiles are easier to transfer upon a death than to put them into your Living Trust. When you buy a new car, take the ORIGINAL title in the name of your Trust.
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8. If I have a Living Trust, do I still need a Will?

Yes. If you transfer all your property into your Living Trust, your Will probably will not have to be used. But you should have a Will to catch any property that was not transferred into your Trust. We call this a “Pour-over Will.” A Pour-over Will says that upon your death any property that is in your name is transferred into your Trust for administration. This can simplify the probate of those items under that Will.
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9. Who should I name as Trustee?

You may act as Trustee yourself, or you may name anyone of your choice to serve as Trustee. The Trustee must be a person over the age of 18 years, or a bank, attorney or professional trust company. In most cases you know more about what you want your Trust to do, so you are the obvious choice to act as Trustee. If you are married, your spouse is usually named as a Co-Trustee.
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10. Who should I name as Successor Trustee?

The Successor Trustee takes over as Trustee in case of the first Trustee’s death, disability, legal incapacity, or resignation. If you and your spouse are Co-Trustees, you can set up your Trust so either one of you can serve as sole Trustee if the other could not serve for any reason. You should name one of your relatives, friends, Beneficiaries, or a professional Trustee to serve as Successor Trustee. This is a personal decision based upon who is available. This should be someone you think would be best able to manage your Trust and distribute the property upon your death.

An Alternate Trustee should also be named in case your first chosen Successor Trustee cannot serve.
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11. What do I do after I set up my Living Trust?

When you set up your Trust, all your assets are listed on the “Trust Schedule of Assets”. This is a list of the assets you want to transfer into your Trust. After you set up your Trust, each company listed on your Trust schedule is notified of the change and they will note it on their records. This is called “Funding the Trust”.

For example, if you transfer a bank account into your Trust, you should tell the bank so they can note this in their records. They will usually have you sign a new bank signature card showing the Trust as the new owner.

If you transfer stocks and bonds into your Trust, you should notify the stock or bond transfer agent, usually named on your stock or bond certificate. Usually a corporation or bonding company will send you a transferring form when you tell them you have made the transfer. You may ask your stock broker to do this for you. There is generally no fee for such a transfer.

In addition, you should draw up a new deed for any real estate you transfer into the Trust. The new deed should show the name of the Trust. The deed should show the name of the Trustee and the date of the Trust. This new deed should be recorded in the County where that property is located. There will be a fee to record your new deed. You should check with your County Recorder to find out about other requirements such as transfer tax exemption numbers, etc.

You should also notify the Successor Trustee named in your Trust. Tell him (or her) that you have set up your Trust and that you have named him as Successor Trustee. Also make sure you tell him where you put your original Trust document.
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12. Where should I keep the Living Trust documents?

You should keep the original Trust document in a fireproof file box or safe. You should not keep it in a safety deposit box at a bank because a safety deposit box is often inaccessible upon your death. Copies of your Trust should only be used for reference during your lifetime. Only the signed original of your Trust is a valid legal document.
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13. How can I change or revoke my Living Trust?

Your Living Trust is completely revocable. This means you can amend any of its terms—or revoke the entire Trust—at any time. If you’re amending the Trust, your amendment should refer to the article which allows you to modify the Trust. You should clearly state the changes you want to make. This amendment should be in writing, signed by each of the Settlors, and notarized in the same manner as the original Trust document. The original of this amendment should be kept with the original of your Living Trust.

One way to effectively revoke your Living Trust is to simply transfer your property out of the Trust, leaving the Trust empty. You need to retitle the property, just as you did when you put it into the Trust. Also, you need to notify banks and other companies involved, just as you did when you set up your Trust. Then you must also revoke your Pour-over Will. You may do this by executing a new Will.

If you wish to completely revoke the Trust, rather than just empty it, you should prepare a written Notice of Revocation, in the same manner as an Amendment discussed above.
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14. Do I have to file a tax return for the Living Trust?

No, since you control and may revoke your Living Trust, any income to the Living Trust is treated as your income. You do not need to file a separate tax return for your Trust. Nor do you need to obtain a separate federal identification number for your Trust. This I.D. number remains your social security number.
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15. Do I need to record my trust with any government agency?

No, you do not. A Living Trust is a private document and will remain so even after your death and distribution of your estate.
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16. Is a Living Trust valid in all 50 states?

Yes, a Living Trust is accepted in each state as well as most countries governed by a civil code.
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