| What is a Aliving trust? |
A living trust is a way for you to control what happens to your property after you die without the delay and expense of probate proceedings. While you are still living you can still use your property any way you wish. |
| What is an irrevocable trust? Why would I want one? |
An irrevocable trust is a trust where the property contributed to the trust can not be withdrawn. This makes it different than the Aliving trust@ because it places limits on what you may do with your property. It is often used for asset protection and can be a valuable part of your overall financial plan. Because it is irrevocable it should be used with care. One of the most common irrevocable trust is an Irrevocable Life Insurance Trust (ILIT). |
| What is the difference between a will and a living trust? |
The primary difference is that the living trust allows you to avoid or minimize the delays and costs of probate by transferring your assets to the trust before your death but allowing you to control and use the trust assets during your life. |
| Why would I want to avoid probate? |
If your estate is subject to probate, distribution to your heirs may take longer than with a trust and the costs and fees to probate the estate will generally amount to 4% to 6% of the total value of your estate in addition to any estate taxes. For example if you own your house free and clear when you die, and the house is worth $500,000 probate fees on the house alone could be $20,000 to $30,000. If the house was transferred to your trust before you die your estate would not have to pay these fees. |
| Will setting up a trust avoid estate taxes? |
Not automatically. If done properly, setting up a trust can minimize or even avoid estate taxes for many estates. For a married couple with a combined estate of $2 million or more, setting up the right trust can save over $400,000 in federal estate tax using year 2006 schedules. |
| Is a trust right for me? |
Maybe. Depending on the size of your estate and what you want to accomplish a trust may be right for you. Also, depending on your own situation and desires you may want to establish different types of trusts for differing purposes. Generally, a trust costs more to set up than a will but results in significant savings later. |
| Do I have to do anything after I set up the trust? |
It is important that the trust be Afunded@ during your lifetime, i.e., property must be placed into the trust name, or all property that is not transferred will be subject to probate. |
| If I have a trust do I still need a will? |
A will is often used together with a trust to transfer any property that was not transferred to the trust prior to death. |
| How do I set up a trust? |
A trust is generally set up by signing a Trust document which declares that you wish to establish a trust. The trust must then be Afunded@ by transferring property into the trust name. |
| Can I set up my own trust? |
In theory yes but it is not recommended. Many of the laws regarding trusts are complex and unless the trust is properly established and funded it may not accomplish what you intended. |
| How much does it cost to set up a trust? |
This depends on what type of trust is right for you, how complex the trust agreement will be, and the type and amount of property that will be transferred to the trust. If a trust is right for you, the cost to set up a trust is usually far less than probate fees would be. |
