Q. I realize that living trusts cost more than wills, but do I have to pay another big fee if I want to change my trust?
A. No. A trust can be amended by a simple document called a "trust amendment." This is a low-cost document.
Q. What does a trustee do?
A. While you are alive, the trustee invests the trust and follows your instructions. If you become incompetent, the trustee pays bills and has overall responsibility for trust finances. After your death, the trustee pays final bills and taxes much like a personal representative (except without the supervision of the probate court.) The trustee's last duty is to distribute the trust in accordance with your wishes written in the trust.
Q. Who can be my personal representative (executor) in Florida?
A. Anyone who is a Florida resident can be your personal representative. Non-Florida residents must be blood relatives. Out of state banks cannot act unless they have Florida-approved powers to do so
Q. What do the terms settler and grantor mean?
A. These terms mean the same thing and are interchangeable. They are the words we use for the person who creates a living trust agreement and activates it before death. I prefer the word "settler" because it communicates best (i.e., the "settler" sets up the trust.)
Q. My daughter is divorced and is a spendthrift. Her friends and children always take advantage of her. We need to protect her and the money we want to leave her. How can this be accomplished?
A. You must set up a spendthrift trust for your daughter. She can receive a monthly income and principal if she needs it. Consider a bank trust department or relative to manage the trust for your daughter.
Q. What is a joint trust and how is it used?
A. A "joint" trust is one trust set up together by 2 settlers (usually spouses). The trust usually says that both are co-trustees and both control the trust together until one party dies. After the first death, the surviving co-trustee continues the trust and has full control over it. When the second spouse dies, a final successor trustee distributes the trust free of probate. A joint trust is used by married people who want to avoid probate and whose estate is not large enough to have a tax problem. The joint trust guards against probate if both are killed simultaneously and also can provide the normal trust help against possible incompetency for the survivor. A joint trust is a simple probate avoidance tool that allows a married couple of modest means an excellent tool to guard against incompetency and pass their assets to their loved ones without probate.
Q. If my husband and I have all our bank accounts in joint ownership in trust for our son, is it necessary to have a living trust to avoid probate?
A. Not for the bank accounts, but what about your home, stocks, bonds, car and other assets? These assets will automatically go to probate if they are not held in a living trust.
Q. Is it true that probate is a matter of open public record?
A. Yes, the probate court is open to the public. Anyone for any reason can examine most of the court files and see your will and any codicils to it after your death.
Q. I want to set up a living trust. Can I be the settler and trustee of my own trust?
A. Yes. This is what is always done. Upon your death or disability, you name a successor trustee. The living trust avoids probate of your estate.
Q. I own a lot of stocks and bonds in my individual name. Can I re-register them in my name in trust for my daughter? Also, will this avoid probate?
A. You cannot register stocks or bonds in your name in trust for your daughter. Only a bank account can be retitled that way. If the stocks and bonds are in your name, they will have to be probated upon death.
Q. All of my bank accounts are in my name in trust for my son, with the exception of my condo. I want to avoid probate. What do you suggest?
A. Give your son a life estate deed. Upon your death, it avoids probate and goes directly to him. It is a very inexpensive legal procedure. You would also still get your homestead exemption.
Q. Is there any amount that my estate can be and not have to pass through a full probate?
A. Yes, if the assets solely in your name are less than $75,000, then a summary administration can take place in one day instead of a full probate administration that may take months or years.
Q. My wife and I have everything in joint names. We are concerned about a common disaster or what happens upon the death of a second spouse. Can a living trust avoid expensive probate proceedings?
Yes, a joint living trust can avoid probate of your assets and protect both of you in the event you are disabled. Don't wait — set up the trust now, and you won't have to worry about your estate in the future.
Q. Why should I name a family member or friend as my trustee or personal representative instead of a bank trust department?
A. There are many factors to consider in selecting a personal representative. Reasons to select a family member or friend as a trustee include: (1) The bank's fee will be saved, (2) The family or trusted friend will take a closer more personal interest. (However, keep in mind that disgruntled family members may mean bad family relationships for years to come if the settlement is not smooth.)
Q. When should I name a bank trust department as my personal representative or trustee instead of family member?
A. There are many reasons to name a trust department as personal representative of your estate. (1) The bank has tax, probate and investment expertise, (2) The bank is local and your children may be scattered around the county or world, (3) The bank is reliable and will always be there, (4) The bank is bonded and highly regulated by treasury officials, (5) The bank is impartial, and because of this, family jealousies will not play a part in your settlement.
Q. If I use a bank trust department as my trustee, what happens if the bank fails?
A. A trust account handled by a bank's trust department is legally separate from the bank's assets. The bank's creditors have no claim to the trust assets. If the bank fails, your trust assets are not lost. The bank's successor (supervised by federal or state officials) will take over the trust without loss to your family.
Q. We understand that if the value of our estate is less than $5 million in 2011-2012, it is unnecessary to put our wills through probate?
A. The $5 million figure is for estate tax purposes. It has nothing to do with probate. If you had $100,000 in your name and died, your estate would have to be probated. Probate is expensive (6% of your estate) and usually takes a long time. Consider a living trust to avoid probate. It will protect you in the event of disability and is private and easy to set up.
Q. If I create a revocable living trust, must I file an extra income tax return each year for the trust?
A. If you are your own trustee, you do not file any extra tax return for the trust. You continue to file the normal personal tax return or the Form 1040 and register the trust assets under your own social security number
Q. What is an irrevocable trust and when is it used?
A. An irrevocable trust is just as its name implies, it cannot be revoked or changed once it is established. An irrevocable trust is used to lower estate taxes by gifting property to it. To save estate taxes, however, property must be "given away" to the trust. This means that once the property is given away, you cannot receive any benefits from it. Thus, one does not use an irrevocable trust as an estate planning vehicle unless you're willing to part with all control and benefits from the property to be placed in the irrevocable trust. One uses an irrevocable trust in place of an outright gift to a beneficiary because you want the money for the beneficiary in the hands of a trustee instead of the beneficiary (minor grandchild, adult child you cannot handle money, etc.).