Kansas and Missouri Estate Planning FAQ's

The Dorsch Law Firm

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How Will My Living Trust Avoid Probate?

"Probate" includes the process by which the court supervises the distribution of your estate after your death. Whether or not you have a Will, probate is normally necessary.

A Revocable Living Trust is designed so as to not require court supervised probate. In the Trust you designate a trustee to succeed you after your death. This successor trustee is responsible for transferring the assets in your Trust to your loved ones as stated in your Revocable Living Trust Declaration and the "Trust Minutes" included with your Trust.

Who Can Be a Trustee?

During their lifetimes, persons with Living Trusts normally act as their own trustees. However, there is the option to select a professional trustee, such as a bank or Trust company, to manage the assets in your Trust. For example, an individual with a large estate who does not want the headaches of managing certain assets can select a professional trustee to manage those assets. Professional trustees will normally charge a fee for their services.

More important, the trustees who handle your affairs after your death need clear direction from you so as to enable them to distribute your estate correctly. In your Trust document great care has been taken to ensure that not only do your trustees have the authority to distribute your estate, but also that your estate is protected against anyone who may wish to alter your intentions.

Who Are Settlors, Trustees, Successor Trustees and Beneficiaries?

By creating your Living Trust, you are the "Settlor" of the Trust. As stated above, you may also be the "Trustee" of your own estate during your lifetime. Likewise, during your lifetime you are also the "Beneficiary." You will designate in the Trust who will act for you after your death the person or entity designated is the "Successor Trustee." Similarly, after your death, those designated in the Trust to receive distributions from the Trust become the successor "Beneficiaries."

If I Am the Settlor, Trustee and Beneficiary, is There Really a Trust Created?

Yes. By designating beneficiaries who will receive your estate according to your wishes after your death, a Trust results. You can think of your Trust as a substitute for a Will; however, a Will differs in that it does not take effect until after your death. A Living Trust takes effect whenever you want, simply by your act of transferring your assets to the Trust, or "funding" the Trust. The Living Trust takes effect now as a dynamic instrument for your personal estate plan.

What is the Difference Between a "Funded" and "Unfunded" Trust?

Although your Living Trust will not take effect until you have properly executed all of the necessary papers, even then your Trust will remain "UNFUNDED" until you transfer your assets into it.

Transferring your assets into your Trust is usually quite simple. For example, with a deed, you can transfer your real property from your current ownership to your Trust and the law does not consider such a transfer to be a sale for the purpose of reassessing your property for property tax purposes. Similarly, 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" and fully operational.

What Do I Do if I Want Particular Assets Distributed to Particular Persons 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 document allows you to designate and/or subsequently change the "Trust Minutes" section to indicate your exact desires. The "Trust Minutes" are included with your Trust document and form an integral part of your Trust and its subsequent administration.

Can I Ever Change My Mind?

Yes. Remember, your Revocable Living Trust is fully "revocable" (it can be changed, or even terminated) at any time. Forms are included in your Trust documents to allow you to amend or add to the terms of the Trust as you wish. Also, you can simply revoke your Trust by including a simple revocation statement in the Trust Minutes, stating "on the ___day of __________________201_, I, , hereby revoke for all time, my interest in this, the Trust."

Also, if you acquire assets and wish to have them directed to a particular individual, simply include in the "Trust Minutes" your desires so that your successor trustee can give effect to your wishes according to your Trust.

What is a Pour-over-Will?

Unlike the customary Last Will and Testament that you may be used to, the Pour-over-Will simply directs your named Executor to "pour-over" any asset which you failed to transfer to your Trust during your life, into your Trust at your death for distribution under the terms of your Trust. The Pour-over-Will is a safeguard for implementing the basic terms of your estate plan, even if you forget to transfer certain assets to your Trust. However, because any assets which "pour-over" to your Trust may be required to go through probate, it is important that every effort be made to transfer all of your assets to your Living Trust during your life.

What Does a Durable General 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. A Durable General Power of Attorney allows you to designate in advance an individual to act on your behalf in managing your affairs in the event that you become incapacitated. As an example, the Durable General Power of Attorney would enable your designee to transfer to your Trust any of your remaining assets which, because of an incapacity, you could not transfer to your Trust yourself.

What is a Durable Power of Attorney for Health Care Decisions?

Although optional, most persons choose to execute a Durable Power of Attorney for Health Care Decisions. This document allows the person of your choice to make medical decisions, including withholding medical treatment in certain circumstances, for you in the event you are physically unable to make those decisions. This document should not be confused with the optional Health Care Declaration (Living Will) which expresses your intent as to whether certain life sustaining procedures, etc. should be used if your condition may not warrant them.

Will My Living Trust Avoid Estate Taxes?

A Living Trust will not "avoid" estate taxes; however; the Living Trust can save substantial estate taxes for a married couple. The amount of savings depends on the size of the estate and the circumstances existing at the time of your death. If you have a particularly large estate, it may be helpful to explore additional estate tax savings opportunities.

Does a Living Trust Make Sense for a Single Person?

Yes. A Living Trust is just as effective for a single person as it is for a married couple.

Does a Living Trust Make Sense for an Estate of Less Than $5,000,000?

Yes. Do not confuse the "$5,000,000" current minimum value which may subject an estate to Federal Estate Taxes with the publicity, delays and costs of the probate process to which estates of much lower value may be subject. Please note that the U.S. Congress may change this amount after 2012.

Does the Living Trust Prevent Me from Borrowing on Assets in the Living Trust?

No. Although lenders may want to see a copy of the Trust document, a Living Trust does not restrict in any way your rights to borrow on assets in the Trust

Does the Living Trust Protect My Estate from My Creditors?

No. The Living Trust does not act as a shield to protect your assets from creditors.

Is the Living Trust a New Idea?

No. The Living Trust has been in existence for 1,200 years. The concept dates back to 800 A.D., as Roman Law, and was later adopted by the English.

Must Special Income Tax Returns Be Filed?

No special income tax forms are required, as long as you are receiving all income from the Trust.

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.

Is It Difficult to Change My Living Trust, and when Would I 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 may want to make to your Trust. The first type of change may be to modify the beneficiaries or change the method of distribution of your assets. The second type of change may involve amending your Trust to keep it current with any changes in the estate tax laws authorized by Congress.

How is the Successor Trustee Forced to Abide by the Wishes of the Settlor(S) of the Living Trust?

Although all trustees are subject to certain general fiduciary obligations imposed by law, as a practical matter, there is minimal oversight on the acts of a successor trustee. Therefore, a successor trustee should be someone whom you trust. In certain circumstances, it may be advisable to have two or three persons acting together as successor "co trustees" (or to provide for a professional trustee).

How Does the Living Trust Dissolve; and is There Any Probate at That Time?

Once all of the assets are distributed from the Living Trust, the Trust is effectively dissolved. If all of your assets were in the Living Trust, there would be no probate.

The main purpose of a Trust is to protect your assets or wealth, avoid probate, minimize or eliminate taxes, and ensure your wishes are followed. At The Dorsch Law Firm, we can explain your options and help you decide what is best for you and your family. It will be the best decision you’ve ever made regarding your wealth! Contact us today or call (913) 685-9190!