Revocable Living Trusts - Hilliard Lyons

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Revocable Living TrustsDeath tax returns must be filed by the trustee. Incometaxes for the decedent for the year of death must befiled and assets transferred.Do trusts avoid probate? How?Assets held in the name of a deceased person mustpass through the probate process. Correctly structured,assets held in a revocable living trust are not owned bythe decedent; they are owned by his or her trust. Thetrust does not “die” when its creator does. A successortrustee may have taken over, but the trust itself isstill a viable entity. Wills do not avoid probate at all.Testamentary trusts, since they are created under theterms of a will, actually have no effect until they areprobated. Assets owned by a revocable trust should notbe subject to the jurisdiction of the probate court.What happens to my will if I create arevocable trust?Your existing will does not cover assets placed into acorrectly designed trust. To completely coordinateyour estate plan, when a trust is created, a new will (ora codicil amending an existing will) is usually prepared.A will prepared in conjunction with a revocable trust isknown as a “pour-over” will. This type of will providesthat anything you own outside the trust will pass tothe trust when the probate process has been completed,and will thereafter be controlled by the terms of thetrust.How can a Revocable Living Trust help in theevent of incapacity?The trustee of a revocable living trust may be givendetailed authority to manage the assets of the trust, paymedical bills, file insurance claims, and pay day-to-dayexpenses of the beneficiary. In the typical revocableliving trust situation, the trust creator serves as theinitial trustee. If he or she becomes unable to handlebusiness affairs, the successor trustee named in thetrust may take over without involvement of the localdisability court, and use the trust assets to care of thetrust’s creator. The terms of the trust can specify how“care” is to be defined, giving the trust creator indirectcontrol of his or her treatment upon disability.How can a Revocable Living Trust saveestate taxes?For married couples, a carefully structured trust canprovide that both of their estate tax exemptions willbe fully employed. As of January 1, 2015, $10,860,000of the assets of a married couple may pass tax freeto their beneficiaries. For single persons with largeestates, revocable living trusts can provide estate taxminimization measures which allow the grantor’sannual gift tax exclusion to be fully utilized, even if thegrantor becomes incompetent.Some of the same savings can be realized with wills,but wills do not have the added advantage of avoidingprobate.
Revocable Living TrustsHow can a Revocable Living Trust protectmy family?The privacy enjoyed by a revocable living trust protectssurvivors. Nosy neighbors, ex-spouses and formerin-laws are not able to read the terms of a trust ordetermine its assets.Revocable living trusts may provide that after thedeath of the trust creator, the trust should continuefor the benefit of a spouse and/or children, regardlessof the ages of the children. Income and principal maybe applied for their benefit long after the death ofthe trust creator. Under certain conditions, a trust ofthis type cannot be broken, it cannot be invaded if aspouse remarries and the new spouse desires access totrust funds, it cannot be invaded by children’s spouses,creditors of a spouse, or children, or in a divorce action.The trust may even be drafted in a manner that willhelp your children minimize or avoid estate taxes attheir deaths!How does the trust become effective?After you and your attorney prepare and execute arevocable living trust, it must be funded by titlingassets in the trust’s name. It is not necessary that thenames on all assets be changed, but any asset held inyour sole name, without a contractually designatedbeneficiary (such as an IRA or life insurance policy),will require probate at your death.What are the income tax consequences of aRevocable Living Trust?If the trust creator serves as his or her own trustee, thetrust simply uses the creator’s social security numberfor tax purposes. No special forms are required to befiled.How much does it cost to set up a RevocableLiving Trust?Costs of establishing a revocable living trust dependupon the complexity of your estate plan and the extentof your estate. Fees also vary from attorney to attorney.In an effort to minimize the costs of creating trusts toour clients, the estate planning specialists at HilliardLyons Trust Company are happy to offer financialadvice and general estate planning suggestions to ourclients, but we are unable to prepare trusts and wills,or offer legal advice. This must be done by your legalcounsel.For more information about our services, call us at(502) 588-8400, (888) 878-7845, or email us atTrustInfo@hilliard.com.How do I fund my trust?A trust is funded by making the name changes referredto above. Your Hilliard Lyons Financial Consultantwill help you re-title your securities, regardless ofwhere you acquired them. Your banker will help youre-title your cash accounts, and your attorney will helpyou re-title real estate.J.J.B. Hilliard, W.L. Lyons, LLC (Hilliard Lyons) and Hilliard Lyons Trust Company, LLC are affiliated companies. Securities offered by Hilliard Lyons.Neither Hilliard Lyons nor Hilliard Lyons Trust Company provide individualized tax, accounting or legal advice. This piece is intended for general educationalpurposes only. Please consult your accountant or attorney for personal tax, accounting or legal advice. © 2015 J.J.B. Hilliard, W.L. Lyons, LLC.
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Revocable Living Trusts - Hilliard Lyons

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