Nick Y. Shimoda, P.C.
186 Belmont Dr
Dothan, AL 36305

LIVING TRUST / SPECIAL NEEDS TRUST

Q: What is a Living Trust?

A: A living trust is a written legal document that provides instructions on how property titled in the trust's name is to be managed. There are generally three parties involved with trusts:

  1. Trustmaker - the person who makes the trust
  2. Trustee - the person on institution entrusted by the Trustmaker to carry out the trust's instructions
  3. Beneficiary - the person who benefits from the trust

Living trusts go into legal effect upon signing, when the Trustmaker is still alive. This distinguishes them from testamentary trusts, which become legally effective when the Trustmaker dies.

Q: What are the advantages of having a Living Trust?

A: Like a Will, a Living Trust is a legal document that provides for the management and distribution of your assets after you pass away. However, a Living Trust has certain advantages when compared to a Will. A Living Trust allows for the immediate transfer of assets after death without court interference. It also allows for the management of your affairs in case of incapacity, without the need for a guardianship or conservatorship process. With a properly funded Living Trust, there is no need to undergo a potentially expensive and time-consuming public probate process. In short, a well-thought out estate plan using a Living Trust can provide your loved ones with the ability to administer your estate privately, with more flexibility and in an efficient and low-cost manner.

Q: Will I lose control over my assets if I establish a Living Trust?

A: Absolutely not! During your lifetime when you are mentally competent, you have complete control over all your assets. You may engage in any transaction as the trustee of your Trust that you could before you had a Living Trust. There are no changes in your income taxes. If you filed a 1040 before you had a trust, you continue to file a 1040 when you have a Living Trust. There are no new Tax Identification Numbers to obtain. The Living Trust can be modified at any time or it can be completely revoked if you so desire. Upon your incapacity, your successor trustees are able to act on your behalf, according to the instructions you have laid out in the Living Trust. Upon your passing, the Trust becomes irrevocable so that no one can change your testamentary wishes.

Q: What assets are left outside of my trust?

A: Assets with beneficiary designations such as a life insurance policy or annuity payable directly to a named beneficiary need not be transferred to your Living Trust. Furthermore, money from IRAs, Keoghs, 401(k) accounts and most other retirement accounts transfer automatically, outside probate, to the persons named as beneficiaries. However, when you do your estate planning, it is important to seek the counsel of an experienced attorney who is familiar with the intricate regulations of retirement accounts and can coordinate the appropriate beneficiary designations with your overall estate plan.

Q: If I transfer real estate to my trust, can the bank call my loan?

A: In most cases, no. Federal law prohibits financial institutions from calling or accelerating your loan when you transfer property to your Living Trust as long as you continue to live in that home. The only exception to the federal law, enacted as part of the 1982 Garn-St. Germain Act is that it does not provide protection for residential real estate with more than five dwelling units. However, we find that most clients who do own residential property with more than five dwelling units tend to own them through a business entity and not directly in their individual names and hence are not concerned with the five dwelling exception.

Q: Why do I need a Pour Over Will if I have a Living Trust?

A: A Pour-Over Will is used first to name a guardian for minor children. Second, it protects against intestacy in the event any assets have not been transferred into the trust at the death of the Trustmaker/Owner. It will also invalidate any previous Wills which you may have executed. Its function is to "pour" any assets left out of the trust into it so they are ultimately distributed according to the terms of the trust.

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The information obtained at this site is not, nor is intended to be, legal advise. You should consult an attorney for individual advice regarding your own situation.

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