Fill and Sign the Revocable Living Trust Virginia Form

BASIC QUESTIONS ON THE REVOCABLE LIVING TRUST (NOTE: MUCH OF THE FOLLOWING APPLIES TO REVOCABLE LIVING TRUSTS ONLY; YOUR TRUST IS AN “A-B TRUST,” WHICH IS A TRUST THAT IS REVOCABLE ONLY UNTIL THE DEATH OF THE FIRST SPOUSE , AT WHICH POINT IT SPLITS INTO TWO SEPARATE TRUSTS: A REVOCABLE AND AN IRREVOCABLE TRUST.) 1. HOW WILL MY LIVING TRUST AVOID PROBATE? A Revocable Living Trust is designed to allow you, as Settlor, to ensure that your estate does not require court-supervised probate. Probate is the process of the court’s supervising the distribution of your estate after your death. Whether or not have you a Will, probate is necessary unless you choose to have your estate administered independently of the probate court. You have selected a trustee to succeed you after your death. Your trustee is responsible for carrying out your wishes. Not only can your Declaration of Trust state your desires, but by including in the “Minutes” of your trust other specific requests, the trustee you select to carry out your desires can transfer your assets to your loved ones immediately, without having to wait for court direction. 2. WHO CAN BE TRUSTEE? During your lifetime, you are your own trustee. You may wish to select a professional trustee to manage your assets in trust, but a professional trustee, such as a bank, trust company or title company is not required by law. For example, someone with a large estate who does not want the 1 headaches of managing certain assets can contract with a professional trustee or another person to manage his or her affairs. In some cases, persons who travel outside the country a good deal of the time hire professional trustees to make sure their affairs are handled according to their needs and desires. Like anything else, professional trustees can be costly; however, normally persons with Living Trusts act as their own trustees. More importantly, trustees who handle your affairs after your death need clear direction from you to enable them to distribute your estate correctly. In your trust package, great care has been taken to ensure that your trustees have the authority to distribute your estate as well as the protection against anyone who may wish to alter your intentions. 3. WHAT ARE SETTLORS, TRUSTEES, SUCCESSOR TRUSTEEES AND BENEFICIARIES? By creating your living trust, you are a “settlor.” As stated above, you are normally the “trustee” of your own estate during your lifetime. Likewise, during your lifetime you are also the “beneficiary”. 4. IF I AM THE SETTLOR, TRUSTEE AND BENEFICIARY, IS THERE REALLY A TRUST CREATED? Certainly. By designating beneficiaries who will take your estate according to your wishes after your death, a trust results. You can think of your trust as a substitute for a Will, which differs in the important aspects that a Will does not take effect until after your death and it requires probate by the court. A living trust takes effect whenever you want, by your act of funding it with your assets, and it takes effect now as a dynamic instrument for your personal estate plan. 5. WHAT IS THE DIFFERENCE BETWEEN A FUNDED AND AN UNFUNDED TRUST? Having received your living trust documents, your living trust will not take effect until you execute it by signing all of the necessary papers and 2 obtaining witness signatures and a notary. However even then your trust will remain “unfunded” until you transfer your assets into it. With a deed, you can transfer your real property from your current ownership to your trust. The law does not consider such a transfer to be a sale for the purpose of reassessing your property for tax purposes. In addition, you may contact your bank or other institution where you hold assets to rename your assets and accounts as belonging to your trust. After your assets are transferred to your trust, your trust is considered “funded”. 6. WHAT DO I DO TO BEQUEATH PARTICULAR ASSETS TO CERTAIN PEOPLE FOLLOWING MY DEATH? With a revocable living trust, you can specify at the creation of your trust that you wish certain assets to go to certain persons or organizations at your death. However, as a working document, your trust allows you to designate in the trust “Minutes” (directions) as to exactly what your desires are. The “Minutes” of your trust are included in your trust package, and they remain with your trust as a permanent part of your administration. 7. CAN I EVER CHANGE MY MIND? Yes. Remember that a revocable living trust is fully “revocable” at any time. You can simply revoke your trust by including a simple revocation in the minutes; for example, stating “on xyz date, I hereby revoke for all time, my interest in this, my ABC trust”. Also, if you acquire assets and wish to have them directed to a particular individual, your trust can specify that your successor trustee give effect to your wishes. 8. WHAT IS A POUR-OVER WILL? Since it is impractical to include everything you own in your trust by deed, account or name, you will find included in this package, a simple 3 “Pour-Over Will”. Unlike the normal Last Will and Testament you may be used to, the Pour-Over Will simply directs your named Executor to “pour over” any asset which you failed to included in your trust, for distribution under the terms of your living trust. Typically, a conscientious trustee of his or her trust, will have already transferred all major assets into the living trust so that no probate is necessary to transfer the remaining assets into the living trust through the Pour-Over Will. You may wish to think of the Pour-Over Will as a housekeeping implement for your estate. 9. WHAT DOES A POWER OF ATTORNEY ACCOMPLISH? When you create a living trust, a legal entity is established for the maintenance and care of your assets and estate. In the event that you leave the country or become incapacitated, the Power of Attorney allows you to designate an individual to act on your behalf in Managing your affairs, usually on a temporary basis. 10. WHAT DOES A DURABLE POWER OF ATTORNEY FOR HEALTH CARE MEAN? As an option, most people choose to include a health care Power of Attorney in their trust package. This allows a person of your choice to make medical decisions in the event you are physically unable to make decisions or give consent to treatment yourself. The optional health care Power of Attorney included in this binder also allows your designated agent to withhold medical treatment in certain circumstances (because a “Living Will” segment is included within the document). 11. WILL MY LIVING TRUST AVOID TAXES? A living trust will not “avoid” taxes; however, the living trust can save a great deal in estate taxes. Different taxes can have different results depending on the size of the estate and the circumstances existing at the time of your death. For example, if you have income producing property 4 in your trust, during your lifetime you will be taxed on the income in the same manner as if it were property held by you without a trust. If you have a particularly large estate, it may be helpful to consult with an estate planner to maximize your estate and to avoid the untimely payment of taxes. Your living trust is an important tool in the overall estate plan. 12. DOES A LIVING TRUST MAKE SENSE FOR A SINGLE PERSON? Yes. The living trust is just as effective for a single person as it is for married persons. It does not matter whether you are a widow, widower, or bachelor. 13. DOES A TRUST MAKE SENSE FOR AN ESTATE OF LESS THAN $675,000.00? Yes. The simple reason being that a person can still avoid the problems of probate. A living trust also avoids publicity. An estate which passes through probate, with or without a Will, is public record and the information is accessible to anyone. 14. DOES THE LIVING TRUST PREVENT YOU FROM BORROWING ON ASSETS IN THE TRUST? No. Although lenders may want to see a copy of the trust, the trust doesn’t restrict your rights to borrow on assets in the trust in any way. 15. DOES THE LIVING TRUST PROTECT ME AGAINST MY CREDITORS? No. The living trust does not act as a shield to protect you from creditors. Certain irrevocable trusts may grant such protection, though. 5 16. IS THE TRUST A NEW IDEA? No. The living trust has been in existence for 1200 years! It dates back to A.D. 800 as Roman Law, and then was adopted by the English. 17. MUST SPECIAL INCOME TAX RETURNS BE FILED? No special tax forms are required as long as the Settlor or either Settlor is receiving all income from the trust. 18. WHY IS IT IMPORTANT TO TRANSFER ASSETS INTO THE TRUST? To avoid the horrors of probate. Only those assets in the trust avoid probate. The correct way to transfer your assets into the trust is by changing title from you as an individual or as a couple to you as “trustee(s)” of your trust. This is what is called “funding” the trust. 19. CAN MY SUCCESSOR TRUSTEE MAKE CHANGES TO MY LIVING TRUST? Upon your death (if you are single), or upon the death of both husband and wife (if you are married), the right to change any part of the living trust ceases. The successor trustee may not make any changes whatsoever in the trust document. 20. IS IT DIFFICULT TO CHANGE MY LIVING TRUST, AND WHEN WOULD WANT TO MAKE A CHANGE TO MY LIVING TRUST? It is a simple matter to make an amendment to your living trust. There are two types of changes you would want to make to your trust. The first type of change might be a beneficiary or a change in the method of distribution. The second type of change involves amending your trust to keep it current with estate tax laws enacted by Congress. 6