SUMMARY FOR YOUR REVOCABLE LIVING TRUST
A revocable trust allows you to avoid probate while managing your own estate in the same manner as you currently do. The significance of a revocable living trust is that it survives you at death; therefore, there is nothing for the court to probate. By executing the enclosed “Declaration of Trust”, you are creating an entity to accept whatever assets you choose to place in trust. A trust is defined as an entity that is created to hold assets for the benefit of another. A living trust is an entity in which you place your assets in trust for your own benefit during your life, and after your death, for the benefit of your loved ones. Although the enclosed “Declaration of Trust” may appear complicated, it is really quite simple. The trust actually owns the property you place into the trust, and you own the trust. Thus, you manage and control your property for your lifetime. Following your death, your desires regarding the distribution of your estate are carried out by a person you designate; this person is called your successor trustee. You may wish to have your property go to your spouse after your death and after your spouse’s death, to your children or grandchildren. Depending upon your desires, your trust will include the necessary provisions to ensure that your wishes are carried out. If you are a single or widowed person, you may have family, a friend or charities to which you wish to give your property at your death. Your trust will enable your designated successor trustee to carry out your wishes without the costs associated with probate.
BASICS OF REVOCABLE LIVING TRUST MANAGEMENT
1. HOW WILL MY LIVING TRUST AVOID PROBATE? A revocable living trust is designated to allow you, as Trustee, to ensure that your estate does not require court-supervised probate. Probate is the process whereby the court supervises the distribution of your estate after your death. Probate is normally necessary to distribute your estate to your heirs, unless you choose to have your estate administered independently. Since you have selected a trustee to succeed you after your death, your trustee is responsible for carrying out your wishes independently. Not only can your Declaration of Trust state your desires, but by including in Schedule B or the “Minutes” of your trust other specific requests, the trustee you select to carry out your desires can transfer your assets to your loved ones immediately, without having to wait for court direction.
2. CAN I EVER CHANGE MY MIND? Yes. Remember that a revocable living trust is fully revocable at any time. You can simply revoke your trust by including a simple revocation in the Minutes for example, stating “on xyz date, I hereby revoke for all time, my interest in this, my ABC trust”. Also, if you acquire assets and wish to have them directed to a particular individual, simply include in Schedule B or the Minutes of Trust, your desires so that your successor trustee can give effect to your wishes. 3. WHO CAN BE A TRUSTEE? During your lifetime, you are your own trustee. Normally, persons with living trusts act as their own trustees. You may wish to select a professional trustee to manage your assets in trust, but the law does not require a professional trustee, such as a bank, trust company or Title Company. For example, someone with a large estate who does not want the headaches of managing certain assets can contract with a professional trustee or another person to manage his or her affairs. In some cases, persons who travel outside of the country a good deal of the time hire professional trustees to make sure their affairs are handled according to their needs and desires. Like anything else, professional trustees can be costly. Most importantly, trustees who handle your affairs after your death need clear direction from you to enable them to distribute your estate correctly. In your trust package, great care has been taken to ensure that your trustees have the authority to distribute your estate in accordance with your wishes, and also have adequate protection against anyone who may wish to alter your intentions. 4. WHAT ARE GRANTORS, BENEFICIARIES? TRUSTEES, SUCCESSOR TRUSTEES AND
By creating your living trust, you are a “grantor”. As stated above, you are most likely the “trustee” of your own estate during your lifetime. Likewise, during your lifetime, you are the “beneficiary”. 5. IF I AM THE GRANTOR, TRUSTEE AND BENEFICIARY, IS THERE REALLY A TRUST CREATED? Yes. By designating beneficiaries who will take your estate according to your wishes after your death, a trust results. You can think of your trust as a substitute for a Will, although a trust differs from a Will in two important respects. A Will does not take effect until after your death, and it requires probate by the Court. On the other hand, a living trust takes effect during your lifetime whenever you execute the documents, and when you fund it with your assets, it immediately becomes a dynamic instrument for your personal estate plan.
6. WHAT IS THE DIFFERENCE BETWEEN A FUNDED AND UNFUNDED TRUST? Your living trust becomes effective when you execute the prepared documents; i.e., by signing all the necessary papers, obtaining witness signatures and having the documents notarized. Even then, however, your trust will remain “unfunded” until you transfer assets into it. Transferring your assets into your trust is quite simple. For example, by executing a deed, you can transfer your real property from your current ownership to your trust. The law does not consider such a transfer to be a sale for the purposes of reassessing your property for tax purposes. In addition, you may contact your bank and any other institution where you hold assets to rename your assets and accounts into the name of your trust. After your assets are transferred to your trust, your trust is considered “funded”. 7. DOES MY REVOCABLE LIVING TRUST HAVE TO PAY INCOME TAXES? No. The Internal Revenue Service’s interpretation of the Revocable Living Trust states that the Revocable Living Trust “has no effect upon income taxes.” With a Revocable Living Trust, all income still flows to the individual, who will continue to report all income, as in the past, on the U.S. Individual Income Tax Return (Form 1040) – whether the individual is a single person, married and filing a joint return or filing as head of household. Even though an individual has a Revocable Living Trust, he or she continues to use his or her social security number, as in the past, when filing the Form 1040 personal income tax return and reporting any income received from the assets in the Trust. You should use your social security number as the Trust Identification Number. In 1981, Congress legislated that Form 1041 (the Trust tax return form) would no longer be required for a Revocable Living Trust. If you are ever requested (because of a mistake on the part of the IRS) to file a Form 1041 for your Revocable Living Trust, simply advise the IRS that your Trust is a “Grantor” Trust and that you are not required to file a Form 1041 as provided in Section 1.671-3(a)(1) of the IRS regulations. 8. WILL I BE EXEMPT FROM PAYING ANY REAL ESTATE TRANSFER TAX WHEN I FILE MY GEORGIA QUIT CLAIM DEEDS? Yes, pursuant to O.C.G.A. § 48-6-2(a)(9) the tax imposed by O.C.G.A. § 48-6-1 shall not apply to any deed of assent or distribution by an executor, administrator, guardian, trustee, or custodian; any deed or other instrument carrying out the exercise of power of appointment; and any other instrument transferring real estate to or from a fiduciary; provided, however, that the exemption under this paragraph of the code applies only if the transfer is without valuable consideration.
9. WHAT IS A POUR OVER WILL? Since it may be impractical to include everything you own in your trust by deed, account, or name, you will find included in this package, a simple “Pour Over Will”. Unlike the normal Last Will and Testament you may be used to, the Pour Over Will simply directs your named Executor to “pour over” into your trust any assets that you did not place in your trust during your lifetime, for distribution to your heirs under the terms set out in your living trust. Typically, a conscientious trustee of a living trust (YOU) will have already transferred all major assets into the living trust so that no probate is necessary to transfer the remaining assets into the living trust through the Pour Over Will. You may think of the Pour Over Will as a safety net for your estate. 10. WHAT DOES A FINANCIAL POWER OF ATTORNEY ACCOMPLISH? When you create a living trust, a legal entity is established for the maintenance and care of your assets and estate. If you leave the country or become incapacitated, the financial Power of Attorney allows you to designate an individual to act on your behalf in managing your affairs, usually on a temporary basis. In the extreme example, a financial Power of Attorney will enable your designee to transfer for you, many of the remaining assets that, because of an incapacity, you could not transfer to your trust yourself. Once you transfer your major assets into your living trust, your financial Power of Attorney may also be thought of as a safety net for your estate. 11. WHAT DOES A DURABLE POWER OF ATTORNEY FOR HEALTH CARE DECISIONS MEAN? As an option, some persons choose to include a health care Power of Attorney in their trust package. This allows a person of your choice to make medical decisions in the event you are physically unable to make decisions or give consent to treatment yourself. 12. WHAT DO I DO TO BEQUEATH PARTICULAR ASSETS TO PARTICULAR PERSONS FOLLOWING MY DEATH? With a revocable trust, you can specify at the creation of your trust that you wish certain assets to go to certain persons or organizations at your death. As a working document, however, your trust allows you to designate in your Schedule B or in your trust Minutes just what your desires are. The Minutes of your trust are included in your trust package, and they remain with your trust as a permanent part of your trust administration.