Showing posts with label living trust. Show all posts
Showing posts with label living trust. Show all posts
Monday, January 5, 2009
A Busy Family's Guide to Living Wills & Trusts
The Delta Township District Library hosts "A Busy Family's Guide to Living Wills & Trusts" Monday, January 5, 2009 from 6-7:30pm in the Elmwood Room. Written materials will be provided. No charge to attend. For more information, call Jo Anne Hinds at (517) 285-5353.
Wednesday, October 15, 2008
"What if I don't want to be a trustee?"
Monday evening I presented a program about wills and trusts at the East Lansing Public Library, and during that presentation someone asked what would happen if there was no one in their family that would undertake the job of being trustee of their revocable living trust.
Becoming a trustee requires that you "accept" the job - which is like becoming bound or obligated to fulfill the trust agreement - and if for some reason you can't do that job, you can decline to accept the trust or even resign if you have already started.
But then what? What happens next? Who will take over? Hopefully the creator of the trust named a successor trustee in the trust document that is willing and able to take on the trustee's responsibilities. But what if there is no one else designated?
Some trusts contain provisions allowing competent adult beneficiaries to choose a next successor trustee, others require a court to become involved in the appointment process.
What if there is no one in the family willing and able to serve? A professional trustee (like an attorney or other professional advisor), a financial institution or corporate trustee may be nominated and appointed through a probate court process and will administer the trust for a fee.
If you've created a trust to keep your estate out of court, you can see why your choice of trustee (and a few reliable alternates) is a very important decision.
Becoming a trustee requires that you "accept" the job - which is like becoming bound or obligated to fulfill the trust agreement - and if for some reason you can't do that job, you can decline to accept the trust or even resign if you have already started.
But then what? What happens next? Who will take over? Hopefully the creator of the trust named a successor trustee in the trust document that is willing and able to take on the trustee's responsibilities. But what if there is no one else designated?
Some trusts contain provisions allowing competent adult beneficiaries to choose a next successor trustee, others require a court to become involved in the appointment process.
What if there is no one in the family willing and able to serve? A professional trustee (like an attorney or other professional advisor), a financial institution or corporate trustee may be nominated and appointed through a probate court process and will administer the trust for a fee.
If you've created a trust to keep your estate out of court, you can see why your choice of trustee (and a few reliable alternates) is a very important decision.
Friday, September 26, 2008
A Living Trust is Like a Basket
How do living trusts keep assets from being subject to probate? To answer that question, you need to know a little bit about the probate court process. Assets that are subject to probate might include items that are in your sole name when you die, with no surviving designated beneficiary.
Here's a very simple example. Bob and Betty Brown are married and own most of their assets jointly. Bob has a life insurance policy and retirement accounts. He has designated Betty as his sole beneficiary. Betty dies before Bob.
Bob now owns all of the couple's jointly held assets himself, with no other joint owner. Prior to changing the beneficiary designations on his life insurance policy and retirement accounts, Bob also dies. Bob's probate estate might consist of all assets which were jointly owned with Betty during his lifetime, and assets he owned in his own name without surviving beneficiaries designated.
In contrast, if Bob and Betty had transferred their assets into a joint revocable living trust, their jointly owned assets would not have been owned by either Bob or Betty at the time of their deaths (because they were owned by the trust). Because the assets are owned by the trust and not by the person who died, they are not subject to probate.
Bob will still have to be careful to designate a new beneficiary for his life insurance and retirement accounts - or he could simply name a contingent or alternate beneficiary at the outset which would cover the possibility that Betty might die first.
Simply put, a living trust is like a basket. To fund a trust, you place your assets in the basket (i.e. you change the title of the assets so that they are owned by the trust and not by you). Although with most trusts you can still control the basket and its contents as the creator of the trust - they don't technically belong to you anymore, they belong in the basket.
As a trustee, you may be responsible for taking care of the assets in the basket, but you don't have the right to take anything out of the basket for yourself unless and until the trust agreement allows it. Think of the trust agreement as a set of rules which govern how the assets in the basket can be used and to whom they should ultimately be distributed.
If the creator of the trust has become disabled and is unable to transfer his or her assets into the trust, in some circumstances it may be possible for other fiduciaries to take action to fund the trust. More about this in future posts...
Here's a very simple example. Bob and Betty Brown are married and own most of their assets jointly. Bob has a life insurance policy and retirement accounts. He has designated Betty as his sole beneficiary. Betty dies before Bob.
Bob now owns all of the couple's jointly held assets himself, with no other joint owner. Prior to changing the beneficiary designations on his life insurance policy and retirement accounts, Bob also dies. Bob's probate estate might consist of all assets which were jointly owned with Betty during his lifetime, and assets he owned in his own name without surviving beneficiaries designated.
In contrast, if Bob and Betty had transferred their assets into a joint revocable living trust, their jointly owned assets would not have been owned by either Bob or Betty at the time of their deaths (because they were owned by the trust). Because the assets are owned by the trust and not by the person who died, they are not subject to probate.
Bob will still have to be careful to designate a new beneficiary for his life insurance and retirement accounts - or he could simply name a contingent or alternate beneficiary at the outset which would cover the possibility that Betty might die first.
Simply put, a living trust is like a basket. To fund a trust, you place your assets in the basket (i.e. you change the title of the assets so that they are owned by the trust and not by you). Although with most trusts you can still control the basket and its contents as the creator of the trust - they don't technically belong to you anymore, they belong in the basket.
As a trustee, you may be responsible for taking care of the assets in the basket, but you don't have the right to take anything out of the basket for yourself unless and until the trust agreement allows it. Think of the trust agreement as a set of rules which govern how the assets in the basket can be used and to whom they should ultimately be distributed.
If the creator of the trust has become disabled and is unable to transfer his or her assets into the trust, in some circumstances it may be possible for other fiduciaries to take action to fund the trust. More about this in future posts...
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