Cover image for Make your own living trust
Make your own living trust
Clifford, Denis.
Personal Author:
Fifth edition.
Publication Information:
Berkeley, CA : Nolo Press, 2002.
Physical Description:
1 volume (various pagings) : illustrations ; 28 cm + 1 computer disc (4 3/4 in.).
General Note:
Includes index.
Forms in the book and on the CD-ROM: Basic living trust for one -- Basic shared living trust -- AB living trust -- Witness statement for a Florida living trust -- Assignment of property to a trust for one person -- Assignment of shared property to a trust for a couple -- Amendment to basic shared living trust or AB trust -- Revocation of living trust -- Basic will for one person -- Basic will for a member of a couple -- Affidavit of successor trustee.
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KF734.Z9 C57 2002 Book and Software Set Central Closed Stacks-Oversize

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Property left in a living trust skips lengthy and expensive probate court proceedings and goes directly to the person it's left to. Make Your Own Living Trust clearly explains:
-- how a living trust works
-- how to create a trust
-- how to transfer property to a trust
-- how to amend or revoke a trust at any timeThis bestseller also provides all the forms and instructions necessary to create a basic living trust, a bypass trust (AB trust) and a back-up will.The latest edition covers the new estate tax laws and discusses making a trust the benificiary of retirement accounts and life insurance.Good in all states except Louisiana.

Author Notes

Denis Clifford, a graduate of Columbia Law School, is a lawyer who specializes in estate planning

Reviews 1

Booklist Review

Self-help legal writer (and attorney) Clifford's latest guide is about when to use a living trust and when not to. The living trust is primarily designed to avoid the probation of an estate, but it has other benefits, too, such as avoiding estate taxes, specifying dependent guardians, and keeping the estate confidential. Clifford dis~cusses relevant legal issues for those planning living trusts, and as usual in Nolo Press guides, furnishes plenty of sample forms. Moreover, his second chapter points out some of the human issues involved that usually stir up emotions. In all, an excellent guide--indeed, virtually a step-by-step manual for creating a living trust. ~--George Hampton



An Overview of Living Trusts A. Living Trusts Explained 1/2 1. The Concept of a Trust 1/2 2. Creating a Living Trust 1/2 3. How a Living Trust Works 1/3 B. Probate and Why You Want to Avoid It 1/4 C. Avoiding Probate 1/6 1. Informal Probate Avoidance 1/6 2. Other Probate-Avoidance Methods 1/6 D. Reducing Estate Taxes 1/7 E. Other Advantages of a Living Trust 1/8 1. Out-of-State Real Estate Doesn't Have to Be Probated in That State 1/8 2. You Can Avoid the Need for a Conservatorship 1/8 3. Your Estate Plan Remains Confidential 1/9 4. You Can Change Your Mind at Any Time 1/9 5. No Trust Recordkeeping Is Required While You Are Alive 1/9 6. You Can Name Someone to Manage Trust Property for Young Beneficiaries 1/9 7. No Lawyer Is Necessary to Distribute Your Property 1/10 F. Possible Drawbacks of a Living Trust 1/10 1. Initial Paperwork 1/10 2. Transfer Taxes 1/10 3. Difficulty Refinancing Trust Real Estate 1/11 4. No Cutoff of Creditors' Claims 1/11 Living trusts are an efficient and effective way to transfer property, at your death, to the relatives, friends or charities you've chosen. Essentially, a living trust performs the same function as a will, with the important difference that property left by a will must go through the probate court process. In probate, a deceased person's will is proved valid in court, the person's debts are paid and, usually after about a year, the remaining property is finally distributed to the beneficiaries. In the vast majority of instances, these probate court proceedings are an utter waste of time and money. By contrast, property left by a living trust can go promptly and directly to your inheritors. They don't have to bother with a probate court proceeding. That means they won't have to spend any of your hard-earned money (at least, I presume it was hard-earned) to pay for court and lawyer fees. You don't need to maintain separate tax records for your living trust. While you live, all transactions that are technically made by your living trust are simply reported on your personal income tax return. Indeed, while some paperwork is necessary to establish a probate-avoidance living trust and transfer property to it, there are no serious drawbacks or risks involved in creating or maintaining the trust. These trusts are called "living" or sometimes "inter vivos" (Latin for "among the living") because they're created while you're alive. They're called "revocable" because you can revoke or change them at any time, for any reason, before you die. While you live, you effectively keep ownership of all property that you've technically transferred to your living trust. You can do whatever you want to with any trust property, including selling it, spending it or giving it away. Basically, a revocable living trust is merely a piece of paper that becomes operational at your death. At that point, it allows your trust property to be transferred, privately and outside of probate, to the people or organizations you name as beneficiaries of the trust. A. Living Trusts Explained A trust can seem like a mysterious creature, dreamed up by lawyers and wrapped in legal jargon. Trusts were an invention of medieval England, used as a method to evade restrictions on ownership and inheritance of land. Don't let the word "trust" scare you. True, the word can have an impressive, slightly ominous sound. Historically, monopolists used trusts to dominate entire industries-for example, the Standard Oil Trust in the era of Teddy Roosevelt's "trust-busting." And trusts have traditionally been used by the very wealthy to preserve their riches from generation to generation. (Indeed, isn't one version of the American dream to be the beneficiary of your very own trust fund?) But happily, the types of living trusts this book covers aren't complicated or beyond the reach of ordinary folks. Here are the basics. 1. The Concept of a Trust A trust, like a corporation, is an intangible legal entity ("legal fiction" might be a more accurate term) that is capable of owning property. You can't see a trust, or touch it, but it does exist. The first step in creating a working trust is to prepare and sign a document called a Declaration of Trust . Once you create and sign the Declaration of Trust, the trust exists, and you can transfer property to it. The trust becomes the legal owner of the property. There must, however, be a flesh-and-blood person actually in charge of this property; that person is called the trustee . With traditional trusts, the trustee manages the property on the behalf of someone else, called the beneficiary . However, with a living trust, until you die, you can be the trustee of the trust you create and also, in effect, the beneficiary. Only after your death do the trust beneficiaries you've named in the Declaration of Trust have any rights to your trust property. 2. Creating a Living Trust When you create a living trust document, you must identify: ò Yourself, as the grantor -or for a couple, the grantors. The grantor is the person who creates a trust. ò The trustee , who manages the trust property. This is normally the person or persons who establish the trust-as long as that person, or one of them, lives. ò The successor trustee , who takes over after the grantor dies. This successor trustee turns the trust property over to the trust beneficiaries and performs any other task required by the trust. ò The trust beneficiary or beneficiaries, those who are entitled to receive the trust property at the grantor's death. ò The property that is subject to the trust. Normally, a Declaration of Trust also includes other basic terms, such as the authority of the grantor to amend or revoke the document at any time, and the authority of the trustee. 3. How a Living Trust Works The key to establishing a living trust to avoid probate is that the grantor-remember, that's you, the person who sets up the trust-isn't locked into anything during the grantor's life. You can revise, amend or revoke the trust for any (or no) reason, any time before your death, as long as you're legally competent. And because you appoint yourself as the initial trustee, you can control and use the property as you see fit while you live. WHAT IS COMPETENCE? "Competent" means having the mental capacity to make and understand decisions regarding your property. A person can become legally "incompetent" if declared so in a court proceeding, such as a custodianship or guardianship proceeding. If a person tries to make or revoke or amend a living trust and someone challenges her mental capacity, or competence, to do so, the matter can end up in a nasty court battle. Fortunately, such court disputes are quite rare. And now for the legal magic of the living trust device. Although a living trust is really only a legal fiction during your life, it assumes a very real presence for a brief period after your death. When you die, the living trust can no longer be revoked or altered. It is now irrevocable. The trust really does own the property now. With a trust for a single person, after you die, the person you named in your trust document to be successor trustee takes over. He or she is in charge of transferring the trust property to the family, friends or charities you named as your trust beneficiaries. With a trust for a married couple, the surviving spouse manages the trust. A successor trustee takes over after both spouses die. There is no court or governmental supervision to ensure that your successor trustee complies with the terms of your living trust. That means that a vital element of an effective living trust is naming someone you fully trust as your successor trustee. If there is no person you trust sufficiently to name as successor trustee, a living trust probably isn't for you. You can name a bank, trust company or other financial institution as successor trustee, but that has serious drawbacks. (See Chapter 7, Section C.) After the trust grantor dies, some paperwork is necessary to transfer the trust property to the beneficiaries, such as preparing new ownership documents and paying any death taxes assessed against the estate. (See Chapter 14.) But because no probate is necessary for property that was transferred to the living trust, the whole thing can generally be handled within a few weeks, in most cases without a lawyer. No court proceedings or papers are required to terminate the trust. Once the job of getting the property to the beneficiaries is accomplished, the trust just evaporates, by its own terms. No formal documents need be filed to end the trust. Some types of living trusts, however, are designed to last much longer. First, the living trust forms in this book include provisions for creating what's called a "child's trust" (discussed in Chapter 9, Section C). You can use this type of trust for property you leave to a minor or young adult beneficiary. These trusts are managed by your successor trustee and can last for years, until the young beneficiary reaches the age you specified in your Declaration of Trust. Then the beneficiary receives the trust property, and the trust ends. If you and your spouse create an AB living trust (discussed in Chapters 4 and 5) designed both to avoid probate and save on estate taxes after one spouse dies, that spouse's trust keeps going until the second spouse dies. A MINI-GLOSSARY OF LIVING TRUST TERMS Although I've already used and defined some of these terms, I want to give you a summary of all basic trust terms that are essential when preparing or understanding a living trust. Unfortunately, you can't escape legal jargon entirely when you deal with living trusts. ò The person who sets up the living trust (that's you, or you and your spouse) is called a grantor, trustor or settlor . These terms mean the same thing and are used interchangeably. I use the term grantor in this book. ò All the property you own at death, whether in your living trust or owned in some other form, is your estate . ò The market value of your property at your death, less all debts and liabilities on that property, is your net or taxable estate . Technically, the IRS allows your successor trustee to choose market value at your death or six months later. ò The property you transfer to the trust is called, collectively, the trust property, trust principal or trust estate . (And, of course, there's a Latin version: the trust corpus.) ò The person who has power over the trust property is called the trustee . ò The person the grantor names to take over as trustee after the grantor's death (or, with a trust made jointly by a couple, after the death of both spouses) is called the successor trustee . ò The people or organizations who get the trust property when the grantor dies are called the beneficiaries of the trust. (While the grantors are alive, technically they themselves are the beneficiaries of the trust.) B. Probate and Why You Want to Avoid It If you're reading this book, you probably already know that you want to avoid probate. If you still need any persuasion that avoiding probate is desirable, here's a brief look at how the process actually works. Probate is the legal process that includes: ò filing the deceased person's will with the local probate court (called "surrogate" or "chancery" court in some places) ò taking inventory of the deceased person's property ò having that property appraised ò paying legal debts, including death taxes ò proving the will valid in court, and ò eventually distributing what's left as the will directs. If the deceased person didn't leave a will, or a will isn't valid, the estate must still undergo probate. The process is called an "intestacy" proceeding, and the property is distributed to the closest relatives as state law dictates. People who defend the probate system (mostly lawyers, which is surely no surprise) assert that probate prevents fraud in transferring a deceased person's property. In addition, they claim it protects inheritors by promptly resolving claims creditors have against a deceased person's property. In truth, however, most property is transferred within a close circle of family and friends, and very few estates have problems with creditors' claims. In short, most people have no need of these so-called benefits, so probate usually amounts to a lot of time-wasting, expensive mumbo-jumbo of aid to no one but the lawyers involved. The actual probate functions are essentially clerical and administrative. In the vast majority of probate cases, there's no conflict, no contesting parties-none of the normal reasons for court proceedings or lawyers' adversarial skills. Likewise, probate doesn't usually call for legal research or lawyers' drafting abilities. Instead, in the normal, uneventful probate proceeding, the family or other heirs of the deceased person provide a copy of the will and other financial information. The attorney's secretary then fills in a small mound of forms and keeps track of filing deadlines and other procedural technicalities. Continue... Excerpted from Make Your Own Living Trust by Denis Clifford Copyright © 2002 by Denis Clifford Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.

Table of Contents

1 An Overview of Living Trusts
A. Living Trusts Explainedp. 2
B. Probate and Why You Want to Avoid Itp. 4
C. Avoiding Probatep. 6
D. Reducing Estate Taxesp. 6
E. Other Advantages of a Living Trustp. 7
F. Possible Drawbacks of a Living Trustp. 9
2 Human Emotions and Living Trusts
A. Leaving Unequal Amounts of Property to Childrenp. 2
B. Second or Subsequent Marriagesp. 3
C. Disinheriting a Childp. 4
D. Special Concerns of Unmarried Couplesp. 4
E. Communicating Your Decisions to Family and Friendsp. 5
3 Common Questions About Living Trusts
A. Does Everyone Need a Living Trust?p. 3
B. If I Prepare a Living Trust, Do I Need a Will?p. 5
C. How Can I Leave Trust Property to Children and Young Adults?p. 5
D. Will My Living Trust Reduce Estate Taxes?p. 6
E. Will I Have to Pay Gift Taxes?p. 6
F. Will a Living Trust Shield My Property From Creditors?p. 6
G. Do I Need a "Catastrophic Illness Clause" in My Trust?p. 7
H. How Does Where I Live Affect My Living Trust?p. 7
I. Can I Place Real Estate in a Living Trust?p. 8
J. Can I Sell or Give Away Trust Property While I'm Alive?p. 11
K. Is My Bank Account in the Trust's Name Insured by the FDIC?p. 11
L. Will Property in My Living Trust Get a "Stepped-Up" Tax Basis When I Die?p. 11
M. Who Must Know About My Living Trust?p. 12
N. Could Someone Challenge My Living Trust?p. 13
O. Will Congress or My State Legislature Abolish or Restrict Living Trusts?p. 14
4 What Type of Trust do You Need?
A. If You Are Singlep. 2
B. If You Are Part of a Couplep. 3
C. Individual Trusts for Members of a Couplep. 3
D. A Basic Shared Living Trustp. 4
E. The Tax-Saving AB Trustp. 8
F. Nolo's AB Trustp. 14
5 Nolo's Tax-saving AB Trust
A. The Size of Your Estatep. 2
B. Should You Do It Yourself?p. 2
C. How Nolo's AB Trust Worksp. 3
D. Alternatives to Nolo's AB Trustp. 9
6 Choosing What Property to Put in Your Living Trust
A. Listing the Property to Be Put in Your Trustp. 2
B. Property That Should Not Be Put in Your Living Trustp. 3
C. Property You Can Put in Your Living Trustp. 5
D. Marital Property Lawsp. 10
E. Completing the Property Worksheetp. 13
7 Trustees
A. The Initial Trusteep. 2
B. The Trustee After One Spouse's Death or Incapacityp. 3
C. The Successor Trusteep. 4
8 Choosing Your Beneficiaries
A. Kinds of Trust Beneficiariesp. 3
B. Naming Your Primary Beneficiariesp. 4
C. Simultaneous Death Clausesp. 5
D. Cobeneficiariesp. 6
E. Some Common Concerns About Beneficiariesp. 7
F. Naming Alternate Beneficiariesp. 9
G. Residuary Beneficiariesp. 11
H. Disinheritancep. 12
I. Putting Conditions on Beneficiariesp. 15
J. Property You Leave in Your Trust That You No Longer Own at Your Deathp. 15
K. Beneficiary Worksheetsp. 15
9 Property Left to Minor Children or Young Adults
A. Property Management Optionsp. 2
B. Which Method Is Better for You: Children's Trust or Custodianship?p. 3
C. Tax-Saving Educational Investment Plansp. 4
D. Children's Trustsp. 5
E. Custodianshipsp. 7
10 Preparing Your Living Trust Document
A. Choosing the Right Trust Formp. 2
B. Getting Startedp. 2
C. Making Changes in a Trust Formp. 2
D. Step-by-Step Instructionsp. 3
E. Prepare Your Final Trust Documentp. 26
F. Consider Having Your Work Checked by a Lawyerp. 27
G. Sign Your Living Trust in Front of a Notaryp. 27
11 Transferring Property to Your Trust
A. Paperworkp. 2
B. Technical Ownershipp. 4
C. An Abstract of Trustp. 5
D. Property That Names the Living Trust as a Beneficiaryp. 8
E. Real Estatep. 8
F. Bank Accounts and Safe Deposit Boxesp. 12
G. Securitiesp. 12
H. Vehicles, Boats, and Planesp. 13
I. Business Interestsp. 13
J. Limited Partnershipsp. 14
K. Copyrightsp. 14
L. Patentsp. 14
M. Royaltiesp. 14
12 Copying, Storing, and Registering Your Trust Document
A. Making Copiesp. 2
B. Storing the Trust Documentp. 2
C. Registering the Trustp. 3
13 Living with Your Living Trust
A. If You Move to Another Statep. 2
B. Adding Property to Your Living Trustp. 2
C. Selling or Giving Away Trust Propertyp. 3
D. When to Amend Your Living Trust Documentp. 3
E. Amending a Living Trust Documentp. 5
F. How to Amend Your Trust Documentp. 6
G. Revoking Your Living Trustp. 8
14 After a Grantor Dies
A. Who Serves as Trustee After the Grantor's Deathp. 2
B. The Trustee's Dutiesp. 3
C. Transferring Property to Beneficiariesp. 9
D. Preparing and Filing Tax Returnsp. 13
E. Administering a Child's Trustp. 13
F. Administering a Custodianshipp. 13
15 A Living Trust as Part of Your Estate Plan
A. Using a Back-up Willp. 2
B. Other Probate-Avoidance Methodsp. 2
C. Federal Gift and Estate Taxesp. 9
D. State Death Taxesp. 14
E. Planning for Incapacityp. 15
F. Long-Term Trusts to Control Propertyp. 16
16 Wills
A. Why Prepare a Back-up Will?p. 2
B. What You Can Do in a Back-up Willp. 2
C. Pour-Over Willsp. 3
D. Avoiding Conflicts Between Your Will and Living Trustp. 4
E. Filling in the Will Formp. 5
F. Signing and Witnessing Your Willp. 6
17 If You Need Expert Help
A. Hiring a Lawyer to Review Your Living Trustp. 2
B. Working With an Expertp. 2
C. Lawyer Feesp. 4
D. Doing Your Own Legal Researchp. 4
Appendix A How to Use the Forms CD-ROM
A. Installing the Form Files Onto Your Computerp. 2
B. Using the Word Processing Files to Create Documentsp. 2
Appendix B Forms
Form 1 Basic Living Trust for One Person
Form 2 Basic Shared Living Trust
Form 3 AB Living Trust
Form 4 Witness Statement for a Florida Living Trust
Form 5 Assignment of Property to a Trust for One Person
Form 6 Assignment of Shared Property to a Trust for a Couple
Form 7 Amendment to Living Trust for One Person
Form 8 Amendment to Basic Shared Living Trust or AB Trust
Form 9 Revocation of Living Trust
Form 10 Basic Will for One Person
Form 11 Basic Will for a Member of a Couple
Form 12 Affidavit of Successor Trustee