Living Trusts were first used in 16th century England. Kings wanting to limit land ownership oversaw distribution of property when a landowner died (a form of probate). To avoid disclosure of their land holdings, people set up Trusts with the Church to bypass the King. Landowners deeded property to their Church, in exchange for the promise that the Church would grant the land back to their heirs when the landowner died.
Trusts today
Typically estate planning language is similar from one attorney to the next, which makes it easier for other attorneys to assist with amendments and courts to interpret documents.
How long do Living Trusts last? Living Trusts typically terminate a few years after the passing of the last named beneficiary unless language in the Trust states otherwise.
This feature allows the Living Trust to manage and distribute assets long after the Trustor (creator of the Trust) has passed.
How often do Trusts need updating? Trusts typically include language to automatically adopt new tax and estate laws.
It is still a good idea to review your Living Trust every few years to ensure recently acquired assets are in the Living Trust's name and beneficiary, successor Trustee and powers of attorney clauses still accomplish your goals.
Common Living Trust questions
Who controls the Trust? By creating the Trust, you are the Trustor who controls all language and appointments in the documents, and by appointing yourself Trustee you control all the assets in the Trust, which means you do not lose control of your assets. Married couples typically share control as Co-Trustors and Co-Trustees.
Revocable or irrevocable? If you want the ability to make changes to your Trust, you will want your Trust to be revocable. Most families create Revocable Living Trusts. Estates over the estate tax limit of $2M in 2008 or $3.5M in 2009 can use Irrevocable Trusts to reduce the tax impact on their beneficiaries.
Can Trusts be changed after the Trustors pass? Trusts become more or less irrevocable after the last Trustor passes. Successor Trustees can manage the assets in the Trust but they are unable to change the language of the Trust or veer from the Trust's instructions.
What happens when the Trustor(s) moves? When you move, you'll find all states offer reciprocity and you will not need to recreate your Living Trust. Some states have a registration process so contact an estate planner in your state to inquire about the process.
Can unmarried couples create a Living Trust? Unmarried and same-sex couples can create what are typically called Common Law Trusts. Family members, such as brothers or sisters, are unable to create Living Trusts but other estate planning tools such as Family Limited Partnerships can be used for estate tax purposes.
Types of Living Trusts
A Trust - A type of revocable Trust used in estate planning to avoid probate, help in situations of incompetency, and allow "smooth" management of assets after the death of the Trustor(s) or person who established the Trust. The Trust can be effective in eliminating or reducing estate taxes for married couples. Revocable Living Trusts are established during the life of the Trustor(s), who retains the right to the income and principal and the right to amend or revoke the Trust. When the Trustor(s) dies, the Trust becomes irrevocable and acts as a substitute for a traditional will.
Bypass/A-Disclaimer Trust - A Trust that starts as one Trust (an A Trust) but within 9 months of the first spouse passing can be split into two Trusts (an A/B or Survivor/Disclaimer) so each spouse can claim a federal estate tax exemption.
A/B Trust - Married couples used ths type of Living Trust in which two Trusts (Trust A and Trust B) are created when the first spouse passes. Dividing the estate allows each spouse to avoid federal estate taxes. Otherwise, the surviving spouse takes ownership of all assets and has only his/her exemption when he/she passes.
To work, assets must be in your Living Trust
Your trust can only control assets in its possession. Your goal is to transfer appropriate assets into your Living Trust while you are living.
You maintain control of assets in your Living Trust.
Assets typically transferred to a trust: Property, bank accounts, vehicles and non-titled assets such as furniture, art, jewelry, etc.
Assets not in the trust but naming the trust as a beneficiary: Life insurance, annuities
Assets kept away from the trust: Retirement accounts, such as IRA's and 401k's. Consult your financial advisor.
Learn more about the roles of Trustors and Trustees or how to transfer assets to a Living Trust.
Related research terms:
accountant attorney estate planning lawyer living trust long term care term life insurance wills your city
Copyright 2008
Important: Please consult with a legal professional before undertaking any actions. The information in this web site is provided with the understanding that the publisher is not engaged in rendering legal, tax or investment advice. While every attempt has been made to provide current and accurate information, neither the author nor the publisher can be held accountable for any errors or omissions. You agree not to hold any employee of this www.livingtrustvswill.com liable for action you take from the information on www.livingtrustvswill.com.
Your trust can only control assets in its possession. Your goal is to transfer appropriate assets into your Living Trust while you are living.
You maintain control of assets in your Living Trust.
Assets typically transferred to a trust: Property, bank accounts, vehicles and non-titled assets such as furniture, art, jewelry, etc.
Assets not in the trust but naming the trust as a beneficiary: Life insurance, annuities
Assets kept away from the trust: Retirement accounts, such as IRA's and 401k's. Consult your financial advisor.
Learn more about 
