Assignment of Interests into the Trust - This is the method used to place assets other than real estate into the trust. Property such as bank accounts, investment accounts, promissory notes are transferred into the trust using forms provided by your banking or brokerage institution. A simple phone call to them will provide you with the documents you need to transfer the assets.
Beneficiary - a person or charity you wish to gift your assets to upon your death or incapacity. You may have multiple beneficiaries. You may make specific gifts such as "our home to the children equally." Or, you can divide your estate according to a residual clause - "each of our children receives 50% of our estate after specific gifts are distributed."
Executor - The executor is usually a spouse, responsible child or trusted friend. Try to anticipate if your named executor a. wants the responsibility; b. will be competent to assume the duties several or more years from now, and c. has the financial/business judgment you deem necessary to handle your estate. You may choose an alternate executor also.
Guardian for minor children - the person who will raise your children in the event you are unable. You may appoint an alternate also.
Health Care Power of Attorney - With modern medicine and its ability to prolong life, there often exists a period of difficult decisions prior to death. A Health Care Power of Attorney appoints the person of your choice as your Attorney-In-Fact for health care, the person who will make medical choices on your behalf, in the event you are unable to do so. This avoids the necessity of establishing a conservatorship should you be unable to care for yourself. The Attorney-in-Fact for health care decisions may or may not be the same person as the Attorney-In Fact for financial matters. For example, you may trust your business partner with your financial matters, but that person may not share your beliefs regarding ending life sustaining equipment or other related matters.
Joint Tenancy - A form of property ownership that also avoids probate. Upon the death of one of the joint tenants, the property reverts to the other joint tenant. The surviving tenant then owns the property. This is an effective way of owning property as a married couple. The downside is that probate occurs when the last joint tenant dies. Joint tenancy interests do not received a stepped-up basis per IRS rules and could result in a higher tax bill if the asset is later sold. Your accountant or tax advisor can advise your further on your particular tax issues.
Pour Over Will - A will which names your living trust as a beneficiary.
Power of Attorney for Financial Matters - In the event of your disability due to accident or illness, the holder of a financial power of attorney will handle your financial affairs. This person is called an Attorney-in-Fact for financial matters. This document prevents the need for a court appointed conservatorship to be established saving time and money for your heirs.
Probate - a legal process in which your property is distributed and your last bills and expenses are paid following your death. Probate costs may range from 3-10% of your estate with court costs, attorneys fees, filing fees, appraiser fees and so on. Probate takes an average of 8 months, if there are no problems. Your assets become frozen for a period of time until the affairs get settled. And probate is public record requiring expensive newspaper publication announcing your death. So your estate becomes public record and public knowledge
Revocable Living Trust - A formal trust arrangement established by a single adult or married couple. The purpose of the living trust is to avoid the costs and hassles associated with the probate process upon the death or incapacity of the person who created the trust. A revocable living trust may be changed any time you wish. It also remains in your control during your lifetime. Unlike an irrevocable living trust, a revocable living trust may not provide any tax advantages. You should check with your accountant or tax advisor if you have significant assets to determine whether a revocable living trust is right for you.
Real Property Transfer Deed - Sometimes referred to as a quit claim deed. This document, which is filed with your County Recorder, transfers ownership of the asset from the current owner to the revocable living trust. A quit claim deed is usually used to transfer real estate.
Sub-Trust for minor children - Until a beneficiary gets to be 18 years old, that beneficiary's assets should remain in Trust (or a guardian needs to be appointed). In addition, most people feel uncomfortable distributing a large sum of money to an 18 year old. You have the choice of specifying at what age the beneficiary has uncontrolled access to the gift you make. During the time the Trustee retains control over the gift assets, the Trustee has discretion to give the beneficiary such sums of money the Trustee believes is appropriate for the beneficiary's education, health, support and/or investments. The beauty of incorporating this into a living trust is that upon your death or incapacity, the trustee or successor trustee does not have to report to any Court. He or she is obligated, as a party to your Living Trust agreement, to pay your final bills and then follow your instructions in the Living Trust for the distribution of your assets to your beneficiaries in accordance with your wishes.
Successor Trustee - A spouse, grown child or trusted friend normally acts as Trustee of this Trust during his or her lifetime. Upon your death or incapacity, the successor trustee steps in to manage your trust. You may appoint an alternate successor trustee also.
Trustee - You are generally your own trustee of your revocable living trust during your own lifetime. The successor trustee steps in if you are incapacitated or when you die.
Will and Testament - A legal document appointing your executor, naming your beneficiaries and what each will receive and naming a guardian for your minor children. This may serve as a back up will when it accompanies a living trust. Remember, all wills must go through probate so it's best to be diligent about funding your trust to enjoy the full benefits it offers to you.
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