Frequently Asked Questions


Q: What is a revocable living trust?
  A: A trust is a contract whereby one person transfers property to another person for the benefit of a third person. If the creator of the arrangement sets it up during his lifetime, it is called a "living trust". If the creator retains the right to dissolve this trust, it is a "revocable living trust". A living trust also avoids probate. This is the most widely advertised advantage of a living trust. The revocable living trust avoids publicity. Estates which pass through probate are a matter of public record. Not only is the will available to anyone who wants to see it, but also the inventory of the decedent's assets. You can easily avoid this publicity and achieve privacy by transferring assets into a living trust. Property in the living trust will be kept private both as to its nature and as to who receives it.

Q: Does a bank or trust company have to be involved?
  A: No. The law does not require a corporate trustee even though your individual circumstances may suggest this is a good idea. If an individual or a couple is willing and able to assume the responsibilities of being their own trustee, they can do so. However, when an individual's death, incapacity, or lack of desire necessitates it, a successor trustee steps in. The successor trustee may be anyone you choose to nominate: a child (or children) over the age of 18, your minister, a good friend, a professional trust company or a bank.

Q: If I set up a living trust, do I need a will?
  A: A will is almost always used in conjunction with a living trust. It acts as a safety net, that collects any assets inadvertently left in an individual's name at death. The will used in conjunction with the trust is commonly called a "pour over will". A pour over will merely assigns an individual's assets to the trust.

Q: Why is it important to transfer assets into trust?
  A: To avoid the agony of probate. Probate is required to legally change title on assets that are held in the name of a person who is deceased. When assets are transferred to the trust, the trust becomes their legal owner. Only those assets held in trust will avoid probate, save time and money, and remain private.

Q: Should I put personal property into the trust?
  A: Depends. If your personal property is of nominal value, then it can be transferred free from probate. However, if you have valuable antiques, coins, etc., these assets should be held in the name of the trust.

Q: Will property taxes be increased by transferring my real estate into my trust?
  A: No. A special exemption allows property to be transferred into an individuals living trust without being reappraised.

Q: Revocable or Irrevocable?
  A: A living trust may be either revocable or irrevocable. Revocable means you can cancel or alter its terms. Irrevocable means that its terms can not be changed.

Q: Can a living trust save estate taxes?
  A: Yes. If your estate is above the estate tax exclusion, any amount over that exclusion can be taxed at a rate of approximately 50%.

Q: Do I need a special number for my trust?
  A: No. If you are alone, or you and your spouse together, are receiving all the income from the trust, then no special tax identification number is required. Your social security number can be used as the tax identification number for your trust.

Q: Must special income tax returns be filed?
  A: No. Fiduciary income tax returns are required as long as you and your spouse, or you alone, are receiving all the income from your trust.

Q: Does a living trust make sense for a single person?
  A: Yes. Living trusts are just as important for single people to avoid probate as they are for married couples. The trust can also act as an effective prenuptial agreement. Anyone with an estate worth $150,000 or more is subject to probate.

Q: Does a living trust restrict my rights to borrow on my assets in the trust?
  A: No. Although lenders may want to see a copy of the trust, the trust does not restrict your rights to borrow on assets in the trust.

Q: Does a living trust protect me against my creditors?
  A: No. A living trust does not act as a protection against creditors because it is revocable. However, the trust may contain a "spendthrift" clause that acts as a legal barrier for funds that continue to be held in the trust for the benefit of the children.

Q: What rights does the surviving spouse have in the trust assets?
  A: In a standard trust where the surviving spouse is also the surviving trustee, he or she has the right to buy, sell and transfer any of the assets. The surviving spouse is usually the beneficiary of the trust assets, and therefore has the right to use all income and principal. Trusts can be written so that part of the estate can be set aside in an irrevocable portion upon the death of one of the individuals establishing the trust. The irrevocable portion can then be safeguarded for specific beneficiaries of the deceased.

Q: Does my will avoid probate?
  A: No. Your will does not avoid probate. Probate is a title clearing process. It is expensive, time consuming, and public. Most people can avoid probate by making a living trust.

Q: Who are the parties to the trust?
  A: 1. The creator of the trust is referred to as the "trustor".
      2. The manager of the trust is referred to as the "trustee".
      3. The beneficiary of the trust is the person for whom the trust is established. All three hats can be worn by the same person or couple in an irrevocable trust. You or you and your spouse can be the creator(s), the manager(s) and the beneficiary/beneficiaries of your own trust.

Q: Does a living trust avoid probate on out-of-state realty?
  A: Yes. You can avoid probate on out-of-state realty by transferring those properties into your living trust. For example, if you live in California and you own land in Arizona and Utah, you can avoid probate in Arizona and Utah by transferring those out of state assets into your California trust.