Fill and Sign the Settlor and Trustee Instructions for Revocable Trust Virginia Form

SETTLOR-TRUSTEE INSTRUCTIONS SETTLOR AND TRUSTEE: The instructions outlines below are very general in nature and are drafted to assist you with the questions you may have concerning the Trust of which you are the Settlor or Trustee. Should you have any specific questions, we urge you to contact an attorney to discuss any alternative answers that may be available. TRUST ASSET MANAGEMENT The Revocable Living Trust contains provisions in outlining the various powers granted to the Trustee. The general rule for you to realize is that any action a property owner was allowed to take regarding the property before it went into the Trust, the Trustee may perform in the capacity as Trustee. Thus, control of the assets has been transferred from you individually, to you as the trustee, who must now act for the benefit of the beneficiaries. You are the income beneficiary during your lifetime. Simply remember that you are acting as a Trustee and have a fiduciary responsibility to act in a “prudent” manner. Not all trusts allow you as much flexibility and control as this one, but in the circumstances, it appears best to grant very broad powers to the trustee. REVOCABILITY Your trust is revocable in whole or in part. Thus, you may remove any assets from your Trust without trustee approval. You may dissolve the Trust or you may choose to change or otherwise modify the Trust agreement to meet your individual specifications, desires, and needs. It is an instrument with legal consequences and any major alterations of asset structure you desire should be considered by one familiar with Trust law. MANNER OF HOLDING TITLE Your assets inside the Trust are held by you in a “fiduciary capacity.” This means that as a Trustee you are holding title to the assets for the benefit of someone else. During your life, the income of the assets is generated for your use and benefit. The trustee must turn all income over to you in convenient installments but at least annually. Upon your death, the assets will be distributed in accordance with the instructions given in the Trust document itself. Whenever you purchase a significant asset or change the composition of the Trust assets, you should request the escrow agent or other responsible party to title the new asset property. This leaves no doubt to a subsequent reviewer that the asset was owned by the Trust. You may thereafter effect transactions concerning the asset with the abbreviated name of the Trustee signer, followed by the word “Trustee”. In the case of checking accounts, the term “Trustee” is not necessary. However, some banks may request various compliance methods to satisfy their respective legal departments. Please contact legal counsel or your estate planner if questions arise as to the manner of holding title. ACCOUNTING RESPONSIBILITIES As mentioned earlier, you are acting as a fiduciary for the beneficiaries. Therefore, you owe them the fiduciary duties outlined in the Trust instrument. This includes annual accounting duties, distribution responsibilities, and income production. The language in the Trust is explicit and designed to require strict compliance with measures deemed necessary by legislation. While you need not burden yourself with unnecessary accounting responsibilities, please be certain that good records of income are kept. The Trust will not have to file an annual tax return. The income will be offset by the distribution to you and the Trust will never pay income taxes. The strict compliance measures will also be required of any subsequent Trustees acting on behalf of the Trust, in the event of your death and/or incapacity. Your accountant should indicate on a fiduciary return that all income of the Trust has been given to you and reported under your social security number. This will allow your accountant to report your income and expenses exactly as he or she does now, with the addition of one non- calculating form. MANAGEMENT AFTER DEATH The Trust, which you have executed, offers you many advantages with little or no inconvenience or burdens. It is a creation of the law, which allows the orderly disposition of your estate without the cost, delay, and burden often found in the probate courts. You can put your mind at ease that as a result of properly planning your objectives, you have prepared for the future support and well being of your loved ones. SETTLING THE TRUST ESTATE The term “settling the trust estate” refers to the period immediately after the death of one or both spouses. Settling an estate in a Living Trust is actually quite easy. If all of your assets are in the Living Trust and if the estate has been organized, settling the estate typically takes less than a week. UPON DEATH The death of a loved one is always a traumatic time for those left behind, and the death of a spouse is almost always mentally paralyzing to the surviving spouse. Many people get totally confused and literally do not know what to do first. Immediately upon the death of a loved one, the survivor should notify certain people, in order to set in motion the many steps that must be taken. 1. Make important telephone calls to friends and relatives. 2. Make funeral arrangements, including memorial and funeral notice. 3. Check the safe-deposit box and checking accounts. 4. Make an appointment to meet with the primary advisor. 5. Request for a tax ID number from the IRS, upon the death of the settlor, then the trustee shall file the new tax number. REVIEW PERSONAL DATA FOR DEATH CERTIFICATE Have you ever looked at a death certificate? You will find that it is probably one of the worst sources of information available, because the surviving family members often have no idea of the correct information. It is best to be able to determine the correct information now, instead of guessing later, at a time of emotional upset and bereavement. MILITARY PAPERS Copies of military discharge papers should be obtained. If an individual who served in the armed forces dies, the Veterans Administration will provide $150 toward funeral expenses, a headstone marker, and an American flag, if desired. ORDER DEATH CERTIFICATES Order at least twelve death certificates. A separate death certificate will be needed for each insurance policy and each real asset (real estate, stocks, bonds, etc.) that you desire to ultimately sell or transfer. A simple copy of the death certificate is not sufficient; it must be a certified copy, obtained from the county recorder’s office. Unfortunately, certified copies of the death certificate are seldom available until about ten days after death. However, you can usually obtain one or two copies of the death certificate for immediate use directly from the funeral home. With a copy of the Living Trust and a certified copy of the death certificate, the surviving trustee or successor trustee then has exactly the same power to manage the estate as the deceased individual had while living. CHECK SAFE-DEPOSIT BOX AND CHECKING ACCOUNTS In the early 1970’s, the death of a spouse could have drastically limited the surviving spouse’s ability to gain access to funds needed for daily subsistence. The primitive practice of immediately locking up the safe-deposit boxes and the checking accounts of deceased individuals no longer exists. Now, upon the death of a spouse or parent, neither the checking account nor the safe-deposit box is inaccessible (but to be safe, check with your bank or credit union to make sure). You should look in the safe deposit box for two reasons. First, the deceased may have left a message or a statement of posthumous desires that should be carried out by the survivors. The second and more important reason to look in the safe-deposit box is to inventory the contents to be sure that all of the valuable assets (such as real estate deeds, stocks and bonds) are in the name of the Trust. As good business practice, it is worthwhile to put your safe-deposit box in the name of your Living Trust. With the Trust document and a death certificate in hand, the bank should readily give the successor trustee access to the safe-deposit box. In your estate planning process, do not forget to let your successor trustee know where the safe-deposit box is located, as well as the location of the key to the safe-deposit box. For simplicity you may wish to keep a checking account with a balance of no more than is needed to cover day-to-day expenses. MAKE APPOINTMENT WITH YOUR PRIMARY ADVISOR We use the term “your primary advisor” in a broad sense, because he or she is the person with whom you may choose to counsel. He or she may be from any of several different backgrounds, be it legal, financial, or simply a family member or a close friend. It is your choice. THE SETTLEMENT PROCESS If you have done your estate planning properly and if you have all of your assets in a good Living Trust, your survivors have nothing to do from a legal standpoint. They do not have to change your Trust or change title to any of your assets. The one exception would be, upon the death of a single individual or the second spouse (if married), when the estate is large enough to be subject to federal or state taxation. The surviving spouse or adult children should be able to settle the estate without difficulty, so long as it has been organized. The surviving trustee or successor trustee needs only a copy of the death certificate and a copy of the Living Trust to allow him or her to take whatever action is necessary on behalf of the Trust. FURTHER INSTRUCTIONS FOR YOUR PRIMARY ADVISOR I. Review the Trust instructions in your Living Trust Agreement. II. Notify life Insurance Companies III. Ensure that all assets are inside the Trust. IV. Review the size of the estate. V. File an income tax return. VI. Obtain a written valuation of assets. VII. Review business agreements. VIII. Review credit Cards. IX. Distribute personal effects. X. Review allocation and distribution of assets. The importance of organizing your estate is especially apparent during the process of estate settlement. By organizing the estate, the book prevents a guessing game upon the death of a settlor. Having an organized estate allows the survivor the privilege of settling the estate quickly, rather than trying to piece together the assets in the estate over several months. You and your primary advisor should specifically look at the following sections of the Living Trust Agreement. 1. The actual Trust (specifically, the section covering authority in administering the Trust, and the section covering allocation and distribution to find out the desires of the deceased person). The sections of the Trust Agreement regarding disposition of your real estate and personal effects. If the successor trustee is the surviving spouse, the trust provides that he or she has exactly the same power to administer the trust as before the death of the spouse. Now that only one of the original trustees is still living, it is most important to be sure that the trust names competent successor trustees to assume responsibility for the trust upon the eventual death of the second spouse. Notify Life Insurance Companies Your advisor should check to be sure that each of the life insurance companies has been notified of the death of the insured. Each insurance company will require a certified copy of the death certificate. II. Ensure That All Assets Are Inside the Trust Your advisor should help you ensure that all of your assets are within the trust. If any asset is not in the trust (i.e., not retitled into the name of the trust) and the value of all assets outside the trust exceeds the value established by Virginia for probate, then the assets outside the trust must go through probate. If everything is in the trust, the surviving trustee steps in immediately and with the trust and the death certificate has identically the same power to buy, sell or transfer any of the assets as did the individual who placed those assets into the trust. III. Review Size of Estate The advisor should check to determine whether the estate is subject to federal taxes. If so, the advisor should ascertain which forms need to be filed and how much tax needs to be paid. With proper estate planning, there need not be any estate taxes to pay upon the death of the first spouse, regardless of the size of the estate. However, if estate taxes are due, a Form 706 (Federal Estate Tax form) must be filed, and any taxes due must be paid within nine months of death. There are options available under the tax code for extending estate tax payments over a period of ten years, but for most estates, the taxes do not qualify for the extension. IV. File Income Tax Return Upon the death of a spouse, the adviser should explain that the surviving spouse has a right to file a joint income tax return, (Form 1040, as had been done while the spouse was alive) for the year in which the deceased spouse died. The surviving spouse should keep an accurate records of the decedent’s last medical and funeral expense, because the medical expenses can be deducted from the survivor’s taxable income, and the funeral expenses can be deducted for estate tax purposes. The surviving spouse should use his or her social security number to identify all of the assets in the Trust. The reason for reporting the assets in this manner is that it enables the trustee to transfer assets back and forth between the A Trust and the B Trust (Note: If your Trust is not an “A-B Trust” then this would not apply) as easily as possible. The IRS Trust identification Number is used to identify the assets upon the death of a single settlor upon the death of the second spouse. A surviving spouse acting as the surviving trustee will typically pay out all the income from the Trust to himself or herself and continue to report the Trust income on his or her personal Form 1040 income tax return. V.1 Upon Death of First Spouse If a couple has an A-B Trust, upon the death of spouse, one-half of the Trust, (the decedent’s B Trust, becomes irrevocable. A Form 1041S (S for simple) tax return should then be filed, but only for the decedent’s irrevocable B Trust. This form must be filed each year until no assets remain in the B Trust. The IRS Trust identification Number will be used on the Form 1041S tax return. The Form 1041S and the accompanying Schedule K-1 are the only places where the special Trust ID number will be used during the life of the surviving spouse. All of the income in the Trust B is usually paid to the surviving spouse. However, since the surviving spouse is still a settlor of the Trust, the net effect is paying all of the income to oneself. Therefore, on Form 1041S, the surviving spouse would subtract from the income on Trust B an income distribution deduction in the same amount. Since the amount paid out from the Trust (the decedent’s share) is the same as the amount received (income), the taxable income is zero! Thus, it is easy to see that the Form 1041S tax return on the decedent’s half of an A-B Trust is simply an information return. The surviving trustee would continue to report any income received from the Trust on his or her regular Form 1040 tax return, as was done before the spouse’s death. V.2 Upon Death of Both Spouses or a Single Person Upon the death of both spouses or a single person, the entire Living Trust becomes irrevocable. Depending upon the distribution instructions, income may or may not be retained in the Trust. In either case, however, the successor trustees of the Trust must then file a Form 1041S income tax return. For example, if the Trust were providing for minor children, it is possible only a portion of the Trust income would be distributed to the children. The children would be responsible for reporting the income they received from the Trust on their own individual tax returns, and the Trust would be responsible for paying taxes on any income that was retained in the Trust. Any assets retained in the trust must use the special IRS Trust ID number. The practice of using the Trust ID number after the death of the settlers is logical, because the social security numbers belonging to the settlers cease upon their deaths. V.3 Payment of Taxes Needless to say, if the Trust has retained income and is required to pay federal income taxes, then presumably a state income tax return must also be filed, and any taxes due must be paid. On the other hand, if all of the income is paid out from the Trust, then the recipients of the income will report such income on their own Form 1040 tax returns and pay any previously mentioned, if all of the income of the Trust is paid out, then the Trust has no taxable income to report on Form 1041S. V.4 Income Retained in the Trust It may be to your tax advantage to retain some income in the Trust. Even though the 1986 tax code eliminated the income tax advantages of retaining income in the decedent’s irrevocable half of the Trust and having it act as a separate tax entity, Congress continues to change the tax laws. Therefore, your CPA should review the pros and cons of whether to use the irrevocable Trust as a separate tax entity. VI. Obtain Written Valuation of Assets The advisor should explain that one of the most important functions that must be completed upon the death of an individual who has a Living Trust is to establish a written valuation of all of the assets in the Trust. It is absolutely necessary to obtain written valuation of all real estate and securities in order to determine a new cost basis for these assets, and to take advantage of a stepped-up valuation, thus minimizing the taxable gain when the assets are eventually sold. The advisor should describe why and how to get stepped-up valuation. It is essential to establish a written valuation of each asset upon the death of a settlor. The written valuation provides a valid and documented justification of the asset’s current market value for determining stepped-up valuation. VII. Real Estate The simplest method of establishing current market value for real estate is to telephone two real estate agents from separate firms. Tell the agents that you are interested in the possibility of selling your real estate and that you would appreciate it if they would estimate the value for which you should be able to sell your property (preferably on the high side when no estate taxes are due). Ask the agents to give these figures to you in writing, as well as back up their valuations with “comparable” sales (recent sales of comparable real estate within the neighborhood). On the death of the last settlor, if the estate is going to be subject to estate taxes, you may want to seek an evaluation on the low side. In general, however, you should never ask for either overvaluation or undervaluation of the real estate. If the valuations from the two real estate agents are fairly close together, take the average of the two estimated for the value of your real estate. If the two estimates are far apart, ask a third real estate agent for another valuation on your real estate. It is more important to place these written valuations in your Living Trust book, (or somewhere safe and accessible), so that you may use the valuations to substantiate your new stepped-up cost basis to the IRS, possibly years later when you decide to sell your real estate. You must be able to prove your cost basis in writing. The same principle of establishing written proof of current market valuation at date of death applies to any real estate and to any survivor, whether a surviving spouse or children. Note that your children also get a step-up in valuation as their cost basis upon the death of the surviving spouse. VII. Stocks and Bonds Establishing the current market value of stocks and bonds is very simple, just look in the newspaper. The stock and bond quotations in the newspaper on or near the date of death are sufficient. Simply put the stock quotation page from the newspaper in your Living Trust book, but be sure that the entire page with the newspaper’s dateline is included, so that the date of the quotation is recorded for future use. Alternatively, your stockbroker can give you the actual stock and bond prices on the date of death. Most brokers will provide these figures to you in writing if you ask them. In many cases a monthly statement of account from a brokerage firm will include the value as of the date of the statement. Remember, the market value of the stocks and bonds at date of death becomes the new cost basis, which will be used to compute any taxable gain when the assets are eventually sold. VIII. Review Business Agreements Your advisor should review business agreements for action, dispositions, and benefits. Any businesses must be valued very carefully and wisely. You should hire at least two, and possibly three, certified public accounting firms to value your business. Since most privately held businesses have a minimal cost basis, stepped-up valuation can become extremely important. However, you must establish a sound and justifiable basis to satisfy the Internal Revenue Service! When you have an interest in a business of substantial value, you should be aware that a number of estate planning tools can be used to freeze or establish the value of the business and if desirable, to shift the gain to your children. The various alternatives should be pursued with a knowledgeable estate-planning attorney. The IRS has some fourteen different methods by which to compute corporate valuation, and, upon your death, the IRS will always strive to come up with the highest valuation for your business. For valuation purposes, the IRS looks at a business the day before an individual dies, not the day after. Thus, where there is an interest in a privately held business, a proper estate plan is essential. While you are living, you can usually do something about determining a proper valuation for your business. Failure to do so, however, may have a tragic result. LIVING TRUST GLOSSARY ATTORNEY IN FACT: Someone who is given authority through a power of attorney to do a particular act. An “attorney in fact” need not be a member of the legal profession. BENEFICIARY: One who benefits from the act of another under a will or trust. One who received an advantage, recipient, donee, inheritor, legatee, receiver, heir, grantee, winner, pensioner. COMMUNITY PROPERTY: Property owned in common by a husband and wife, with each having an undivided one-half interest in the property by reason of their marital status. For example, the earnings of one spouse during the marriage do not solely belong to that spouse; the earnings are community property. CONSERVATOR: Someone appointed by the court to manage the affairs of an incompetent person, to liquidate a business, etc. CONTINGENT BENEFICIARY: A person who may or will receive a benefit, but only upon the happening of an event which is not certain to occur, such as the primary beneficiary becoming disqualified for the benefit, for example, by death. ESTATE: An interest in real or personal property; the extent of one’s interest in real or personal property (for example an estate in land). The total property of whatever kind that is owned by a person prior to his or her death and subsequent distribution of that property according to the terms of a will/trust. ESTATE PLANNING: Arranging a person’s property and estate, taking into account the law of wills, taxes, insurance, property, and trusts so as to gain maximum benefit of all laws and to carry out a person’s wishes for the disposition of his or her property upon death. ESTATE TAXES: A tax imposed on the right to transfer property at death; the tax is imposed on the decedent’s (the one who has passed away) estate and not on the recipients of the property. A tax which is based upon the receipt, rather than the transfer, of a decedent’s property is called an inheritance tax. EXECUTOR: The person or institution who is appointed by the testator or testatrix in his or her will to take care of the funds and property after death (also referred to as the “personal representative” of the estate). The executor functions under the jurisdiction of the probate court. FIDUCIARY: A person or institution that manages money or property for another; someone is whom another places great trust and has a right to expect great loyalty. FIDUCIARY CAPACITY: Acting on behalf of another in a relationship that necessitates great confidence, trust and good faith. GUARDIAN: The person who has legal duty to care for and maintain the person and/or property of an unmarried minor child. HEIR: A person who inherits property, according to a state law scheme of distribution, from a person who dies intestate (without a will). INTESTATE SUCCESSION : The transfer of property to the relatives of a decedent who died without leaving a valid will. In most states, a statute will specify which relatives receive intestate shares and in what amount. ISSUE: All persons who have descended from a common ancestor. (e.g., children, grandchildren, great grand grandchildren, etc.). JOINT TENANCY: Property (an estate) held by two or more persons jointly (called co-tenants or joint tenants) in undivided equal shares with the right of survivorship (when a co-tenant dies, his or her share automatically passes to the surviving co-tenants). The joint tenants have one and the same interest; accruing by one and the same conveyance, instrument, or act; commencing at one and the same time; with one and the same undivided possession. LIFE TENANT: A trust beneficiary whose interest consists solely of the use of, and income flow from, property during his lifetime. LIVING TRUST: A legal entity established by means of a written trust agreement during the lifetime of the creator of the trust. The terms of the trust agreement govern the operation of the trust funds. LIVING WILL: A will specifying the conditions under which a person suffering from a terminal illness does not wish to be kept alive by life-support instruments. NOTARY PUBLIC: One whose function is to administer oaths, certify documents, take affidavits, attest to the authenticity of signatures, etc. POUR-OVER WILL: A provision in a will that directs the residue (remainder) of the estate into a trust (after probate). POWER OF ATTORNEY: A document that authorizes another to act as your agent and to make decisions (financial, medical, etc.) on your behalf. PROBATE: A court procedure by which a will is proved to be valid or invalid (the costs of probate). PROBATE COURT: A court with jurisdiction over the probate of wills, the administration of estates, and in some states, the appointment of guardians and adoption of children. QUITCLAIM DEED: A deed of conveyance that passes any title, interest, or claim that the grantor may have without any assurance or warranty that the title is valid. REVOCABLE TRUST: A trust is which the maker or settlor reserves to himself or herself the right to revoke the trust. SEPARATE PROPERTY: Property owned by a married person in his or her own right during marriage (an example might be a gift or inheritance). SETTLOR (Settlor/Trustor): One who creates a trust; also called a Trustor. STIRPES (PER STIRPES): The person from whom a family is descended; a source of descent or title, ancestor. SUCCESSOR TRUSTEE: A trustee who follows or succeeds an earlier trustee. SURVIVORSHIP: Living after another has died. Becoming entitled to property by reason of surviving the death of one of the joint tenants. TAX IDENTIFICATION NUMBER: For revocable trusts, this is simply your social security number. TENANCY BY THE ENTIRETY: A tenancy that is created between a husband and wife by which they together hold title to the whole property with the right of survivorship so that when one dies, the other takes the whole property to the exclusion of the heirs of the deceased. TENANCY IN COMMON: A form of ownership whereby each tenant (i.e. owner) holds an undivided interest in the property. Each tenant in common has a right to possession of the property, but the share in the property may not be equal. There is no right of survivorship. When one dies, his or her share passes to his or her heirs and not to the other tenant(s) in common (unless the latter happens to be heirs). TESTATOR ( If Female , TESTATRIX): A person who makes a will. TRUST: A right of property, real or personal, held by one party (the trustee) for the benefit of another (the beneficiary). The creator of this right is the settlor. TRUST DEED: The deed by which one created a trust or transfers property to a trust. TRUSTEE: The person or institution who is responsible for holding, managing, and distributing money and other property contributed to the living trust for the exclusive use and benefit of the beneficiary(s). BASIC QUESTIONS ON THE REVOCABLE LIVING 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 you have 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 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 TRUSTEES 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 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 “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 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 $1,500,000.00? Yes. The simple reason being that a person can still avoid the problems of probate. A living trust also avoids publicity. An estate that 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. 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 THE LIVING TRUST, AND WHEN WOULD I/WE WANT TO MAKE A CHANGE TO THE 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. If a particular tax change would benefit your estate, you would obviously want to incorporate such a change into the trust.