This glossary and list of commonly asked questions has been prepared
as a reference that new clients can keep on file with their Estate
Plan documents. We think it is a helpful tool and guide in grasping
the concept of a Living Trust and the purpose of the related documents
that comprise a personal Estate Plan.
 Can
I Change a Living Trust?
Yes.
You will find language in your trust that gives you the power to
amend, revise and even cancel it while you are alive and legally
competent, but it is NOT necessary to change your trust when you buy
and sell assets.
Why Have a Living Trust?
The two main reasons are for the avoidance of Probate and
Conservatorship. A third reason applies to married couples. For them,
only by using a properly drafted Living Trust can two estates be
created for estate tax purposes. Without a Living Trust, a married
couple has only one estate for estate tax purposes. With a Living
Trust, a married couple can double their estate tax exemption.
What Causes Probate and Conservatorships?
The need for a signature. Certain types of assets can be transferred
only after the owner signs documents at the time the transfer or loan
is made. A home is an example of this type asset. A person is unable
to sign the necessary documents after his or her death or after
becoming incompetent. The solution to this is a court proceeding
called Probate if the person has died or Conservatorship if the person
is alive but legally incompetent. The court proceeding results in a
court order that takes the place of the needed signature. However, in
a Living Trust, signature authority is held by the Trustee of the
Trust. If the original Trustee dies or becomes incompetent, there is a
pre-designated Successor Trustee available to provide the needed
signatures, thus avoiding the need to have a Probate or
Conservatorship proceeding.
Who’s Who, and When?
Your Living Trust is created at the moment you sign and date it. At
that instant you are the Trustor (Trust Maker), Trustee (Trust
Manager) and Beneficiary, all in one. If you become incompetent, you
can no longer serve as the Trustee but you remain the Beneficiary, and
the Successor Trustee manages the trust for your benefit. When you
die, you are no longer the Beneficiary, and your Successor Trustee is
legally required to follow the instructions you, the Trustor,
documented in your Living Trust as pertains to distributing the trust
assets to the beneficiaries you named in it.
What is “Funding” a Trust?
“Funding” your trust describes the process of changing the title of
each asset from yourself as an individual to yourself as Trustee of
your trust. Most of your major assets have some sort of paperwork that
gives evidence as to who owns them. An example would be a real estate
deed. Another would be a bank account. After you sign and date your
trust, you need to change the title of each asset of this type. THIS
IS A BIG DEAL!! This is the secret trick that is the key to avoiding
Probate and Conservatorship. After you have changed the title, then
the asset may be transferred or encumbered by the signature of the
TRUSTEE, which will either be yourself when you are alive and
competent, or your Successor Trustee when you are either incompetent
or deceased. In either case, the probate court is NOT involved.
Funding Instructions. In most cases you will have us prepare the
documentation to change the title on your California real estate. We
will give you a set of Funding Instructions to follow in changing the
title of your other assets.
Why Do I Also Need a Will?
Your Living Trust will own only your titled assets. Personal property
such as your stamp collection will still be owned by you as a person.
Your Will gives you the means of leaving specific instructions about
who is to inherit your stamp collection, for example. Personal
property for which you have no specific distribution instructions is
defined by your Will as “residue” and distributed in accordance with
the instructions in your trust. For this reason your Will is known as
a “Pour-Over Will”, in that it “pours over into the trust” anything
not distributed by the Will. You will see language in your Will that
references your trust, and this is what makes it a “Pour-Over Will”.
Why Is the Trust So Wordy?
Trusts have lots of words because no one knows what will happen to you
in the future. The trust tries to cover as many situations as possible
so you will not be lacking anything when the time for whatever, comes.
Most of the words are there for a good reason and reflect the highest
professional standards in the drafting of legal documents. Many of the
words may never apply to you, but the important point is, they could.
Where Do I Store It?
The only safe place for your Estate Plan documents is in a commercial
safe deposit box. Keep the original signed documents there and use
photocopies in your home files and for doing business.
Troublesome Terms:
Issue: Your lineal descendants, unless otherwise noted,
as in a statement including “stepchildren” or other non-blood
relatives. “Issue” proceeds from children to grandchildren to
great-great grandchildren, down the line.
Attorney in Fact: The “attorney in fact” or “agent” can
be any person who is legally competent. The person does not have
to be a lawyer. When the documents refer to an “attorney in
fact”, they are not referring to “lawyers”.
Durable: As in “Durable Power of Attorney”, meaning that
the document is in effect as long as the person who has signed
it is alive, even through a period when the person has become
legally incompetent.
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