| |
| |
|
Revocable Living Trusts
Creating a Living Trust
Revocable Trust
Keeping Track of the Assets
Income Tax Reporting
Trust Assets
Creating a Living Trust
The easiest way to understand a living trust is to realize that
it's simply an agreement
between two parties. The first party, the trustor(s) or
grantor(s), establish the trust, while the second party, the
trustee, is a person, bank, or other group who manages the assets
contained in the trust.
| The rules or instructions for managing the trust are
contained in the trust agreement. In the most common case,
that of a trust agreement made by a couple, it governs
how the trust operates when both trustees are alive, what
happens when the first dies, and how the assets are divided
upon the death of both. The trust agreement explicitly
covers who serves as trustee and successor
trustee, who receives the assets when the trust comes
to an end, and any payments to be made from the trust.
|
|
|
Since a portion of the trust becomes irrevocable when
the first spouse dies and cannot be changed, decisions
made when the trust is created must be carefully considered.
Back to the Top
Revocable Trust
The established trust is a revocable
trust as long as both spouses survive. During this time,
the couple may amend it, buy and sell assets contained in the
trust, or even cancel or revoke it entirely.
Back to the Top
Keeping Track of the Assets
While the husband and wife are both alive, it is not legally
required for them to keep records. The original trust normally
includes a list of assets initially placed in the trust, and
that list should be reviewed periodically so that any newly
acquired assets can be titled properly in the name of the trust.
When both die, the successor trustee, named in the trust by
the grantors, will be able to determine what assets the trust
contains.
Back to the Top
Income Tax Reporting
As long as the trust is revocable and either the husband or
wife serve as the trustee or co-trustee,
the trust does not require a separate tax return or tax ID number.
The couple continue to report all taxable income, dividends,
capital gains, and interest on the couple's personal tax return
using the husband's or wife's Social Security Number, but need
not refer to the trust.
Back to the Top
Trust Assets
The trust, obviously, must contain some assets, and the
assets included in it must be titled in the names of the
trustees. As an example, assets would be titled as "John
A. Smith and Ann B. Smith, trustees of the John A. Smith
and Ann B. Smith Trust, dated September 1, 2003."
Real property needs to have a deed recorded in the name
of the trust, but this does not trigger a reassessment
of the property's value. Bonds and stock certificates
must be re-registered in the name of the trust and mailed
to transfer agents, and any limited partnerships contained
in the trust need to be contacted so the title for those
assets can be changed as well. Accounts in banks, savings
and loans, and credit unions must be changed if they're
included in the trust agreement, and stock brokerage accounts
must be transferred and placed in the names of the trustees.
Failure to include such assets in your living trust can
subject them to the probate process upon the death of
their owner.
The trust should be named as beneficiary of life
insurance policies so that the proceeds will be made payable
to it, and not the grantor(s) individually. Profit sharing plans,
IRA accounts, and 401k plans, because of their special income
tax features, normally are made payable to the spouse or other
survivor instead of to the trust.
The husband and wife together can withdraw as much as they wish
from the trust. The list of assets contained in the trust does
not need to be updated if any interest or dividends, or even
any funds, are taken out of a trust itself or any bank, savings
and loan, or credit union account it contains. THE MAMOLA LAW FIRM, APC is conveniently located throughout Orange County. For additional information, please contact us at (949) 333-6543.
Back to the Top |
|
|
| CAUTION: This website is to provide visitors with basic information.
Every legal situation is different, and no information on this website
is to be construed as legal advice on any specific question. Additionally,
the information on this website is for informational purposes, no
warranty is made as to the accuracy of any information contained therein,
or its applicability to any particular situation. This website must
not be used as a substitute for legal advice from qualified lawyer
or legal counsel. No attorney & client relationship or privilege
is formed by visiting this site or by sending my office any unsolicited
e-mail. Therefore, initial emails must not contain any confidential
information. I may already represent parties adverse to you and cannot
advise or represent you until I check for conflicts. I am licensed
only in California, and may offer my services only to those residing
or doing business in California, unless associated with local counsel
or lawyer in accordance with other states' laws. The Mamola Law Firm, APC is not currently licensed to practice in the
State of Nevada.
|
|
|
|
