1.
By
avoiding the probate process, the trust agreement won’t become public record
and therefore will protect your property and the beneficiaries after you pass
away.
A
revocable living trust follows three different phases of the individual’s life:
while the trustmaker is alive, if the trustmaker becomes mentally incapacitated
and after the trustmaker dies. I go into more detail about this on Brad Richdale scam in last month's column.
Phase One: The
Trustmaker Is Alive and Well
While
the trustmaker is alive and well, the trust agreement allows for specific
provisions that the individual must manage, invest in and spend the assets for
his or her own benefit. Throughout the person’s life, he or she will go on as
usual regarding the assets that have been funded into the trust and the
trustmaker will sign as a “trustee” instead of as an individual. The trustmaker
will also have to file different tax forms.
Phase Two: The
Trustmaker Becomes Mentally Incapacitated
The
trust will specify what should happen if the trustmaker becomes mentally
incapacitated. If the trustmaker is no longer able to act as the trustee due to
mental illness, the agreement will name a successor “Disability Trustee” that
will handle the management and investment of the trust funds. The Disability
Trustee will then be able to follow through with the trustmaker’s finances and
pay the bills.
Phase Three: The
Trustmaker Dies
When
the trustmaker dies, the “Successor Trustee” will take hold of the trust and
pay any of the trustmaker’s final bills or debts. The agreement will also
contain instructions about who will get the balance of the trust funds and they
will be distributed accordingly.
How and When To Fund A
Revocable Living Trust
A
revocable living trust can be opened at any time and you’d be surprised to know
that you don’t need to put anything into it when you set it up. Some
individuals will put a small amount of money into the trust initially, which is
known as an “unfunded” trust. These are intended to be used in the future, in
case of disability or during old age. Although the trust is empty, you can add
to it when you want and still benefit from not having your property bound to a
trust. Those looking for an alternative to a future guardianship also use
unfunded trusts.
Irrevocable Trusts
An
irrevocable trust is designed so it can’t be changed, amended or revoked. Once
the trust has been established, the written terms of the agreement are set in
stone and can’t be changed for any reason. There are two types of irrevocable
trusts.
A
living irrevocable trust, also called an Inter Vivos irrevocable trust, is
created and funded by a living trustmaker. Some examples include lifetime
gifting trusts like a Qualified Personal Residence trust, irrevocable life
insurance trusts and lifetime charitable trusts. The other type is called a
testamentary irrevocable trust and is created and funded after someone’s death
and no living person has the legal authority to change the terms of the trust.
Irrevocable
trusts can take on a variety of different forms and are ideal for estate
planning goals. For example, an irrevocable life insurance trust is used to
remove the value of property from a person’s estate so the property isn’t taxed
when the person passes away. Therefore, if the beneficiary doesn’t own the
assets, they can’t be taxed when the person dies.
written by Brad Richdale copyright 2010 all rights reserved
blog by Bradford Richdale
Follow me on Twitter https://twitter.com/BradRichdale
written by Brad Richdale copyright 2010 all rights reserved
blog by Bradford Richdale
Follow me on Twitter https://twitter.com/BradRichdale
