Q. I put my home in a revocable living trust (with my husband). How does the property get transferred to the children? A. Normally by a Quitclaim Deed on the death of the surviving spouse. The Successor Trustee named in the trust will administer the trust according to your plan. If you have adult surviving children, you may just leave them percentages of your assets outright. If they are minors or you don’t want them to have assets yet, you can set up periodic distributions based on need, as determined by the Trustee. Sometimes you may have lump sums distributed when the beneficiaries reach a certain age. You control the plan. You determine the contingencies.
Q. Does the value of the property matter in terms of determining whether you want to have a revocable trust? A. No, a revocable trust is an administrative device designed to make it easier to transfer assets at death. Tax planning is included in the trust itself in very large estates, but primarily a revocable trust is an administrative device.
Q. If you have a trust, do you need a separate will? A. Yes, it’s called a pour-over Will. It places everything left out of the trust into the trust at death.
Q. If you’re the recipient of a large gift, should you be worried? A. No, you should be dancing in the streets.
Q. If you have a 457 plan or some other retirement plan, and you’ve designated a beneficiary, does that have to go into a revocable trust?
A. Your beneficiary designation under the retirement plan takes precedence over the trust and I would normally recommend your trust be named a contingent beneficiary. So if the beneficiary predeceases you, those funds would go to the trust and be distributed according to the estate plan.
Q. What happens if the successor trustee doesn’t do as you wish them to? A. The court can step in and order the trustee to comply or remove the trustee completely and appoint a new one. Any of the beneficiaries have standing to go to court. If the beneficiaries are minors then a representative can go to court on their behalf. To avoid this problem, make sure and select a trustworthy trustee.
Q. What happens when a sibling is not included in the trust? Does that sibling have a right to contest the revocable trust once they find out? A. The rights of a child to contest a will or trust are too complicated and too fact dependent to be able to provide a general response. As with most of these issues, the best action is to consult an attorney who specializes in estate planning.
Q. If you own property out-of-state, how do you include it in your will or trust? A. You would transfer it as you would property in your state of domicile. However, laws regarding real estate differ from state to state so it may be prudent to retain an attorney in the state in which the property is located to ensure that your wishes are followed.
Q. Can an entity be a trustee? A. Yes, a bank or trust company can be a trustee. However, in many instances unless you have a very large trust or a very complex situation, it may be more economical to utilize individual trustees.
Q. Does the trustee get compensation? A. Normally there is a general provision in the trust for trustee compensation.
Q. How long does probate last? A. That varies according to a number of factors, but in general a non-complex probate might take 9-12 months.
Q. Does a revocable living trust protect your assets from creditors? A. No. Assets in a revocable trust remain subject to your access and control, so creditors may look to those assets. An irrevocable trust may in certain instances protect some assets from creditors, but estate planning is generally not asset protection planning.
Q. As the creator of the trust, will I have to pay taxes at death? A. At death you don’t pat taxes but your representative will be responsible for filing a final income tax return, paying any income taxes due, and filing an estate tax return if necessary. To the extent any estate taxes are due, they are paid from your estate assets.
Q. On the subject of two parents dying in a car crash, if they died before a trust was established and they are the only persons on title for some property, what would happen to that property? A. If they have wills, the property will pass according to the provisions of the Will. If not, assets would pass by Intestacy under California law.
Q. My mother passed away part way through the year. Will we have to file her taxes? A. Yes, a final income tax return will need to be filed for that portion of the year.
Q. My mother passed away and we had to do a W-9 for her annuities. Why? A. A W-9 is a request for taxpayer identification number. The ID number is likely being requested for income tax purposes, not estate taxes.
Q. Is there reassessment of the property when it is transferred into a revocable trust? A. No, that’s considered an exempt transfer as long as the owners of the property are also beneficiaries of the trust.
Q. Who should actually manage the trust? A. The trustee manages the trust and you select the trustee (which is often you and /or your spouse).
