Questions About Estate Planning
Life Ins. Trusts
Restatement of Trust
Special Needs Trust
529 Education Plans
Dying without a Will
Reading of the
Health Care Directives
Tenancy in Common
about California Living Trusts
Frequently Asked Questions:
If I have a trust, why do I also need a will?
The type of will that is used with a living trust is called
a "pourover will," because its purpose is to pour (transfer)
assets into the trust if the assets had not been transferred to the
trust previously. This can occur if the trustees fail to make
the transfers of assets to the trust, or if mistakes are made
in titling the assets. A pourover will doesn't have the usual
provisions that are found in a standard will and the only beneficiary
is the living trust.
Does a pourover will have to be probated?
Probate is not required unless the assets that are subject
to probate (in other words, not in the trust) total more than $150,000. In that case, there will
be a probate of the trust assets and also an administration of
the trust assets. However, there are exceptions for
joint tenancy assets, and there may be a
probate of only part of tenancy in common
What are probate assets?
Any asset that is in the decedent's name, and not in
tenancy or in a trust. Assets that are not subject to probate
include IRAs, 401Ks, and life insurance, assuming that a beneficiary
has been named to receive the assets involved. Even these assets
might be subject to probate if the beneficiary listed is the
"estate" of the decedent or if no beneficiary is listed.
Joint tenancy assets become the property of the surviving joint
tenant, regardless of the provisions of the decedent's will or
Do trust documents become public information when
California law requires that notice be given to trust beneficiaries
and the decedent's heirs if all or part of the trust becomes
irrevocable after the death. The beneficiaries and heirs are
then given an opportunity to request a copy of the trust. The
trust might become public information is there is a court
challenge to the trust, in which case a copy of the trust will
be filed with the court.
Who should be chosen as the successor trustee?
Many clients choose their children, either as co-trustees, or in a
specific order of succession. This can be a good choice, particularly if the
proposed trustee has some experience with accounting or taxes. If there are no
children, or if the clients would rather not use their children as trustees,
other choices are other relatives, friends, or trust companies and banks.
However, the person chosen as trustee must be responsible and able to devote
the time required to the trust administration and management. The proposed
trustee does not need to have an extensive knowledge of trusts, law, or
accounting, but should be willing to seek professional help to carry out the
administration of the trust.
Who receives the estate?
The distribution plan for a trust can be the same as the distribution plan in
a will. You can give your estate to your children, set up trusts for
them if they are too young to receive an inheritance, make charitable gifts,
or make gifts to beneficiaries outside of your family. The decision is
yours. However, whenever a distribution is made to an individual
beneficiary, a provision should be included that says who will receive that
distribution if the original beneficiary does not survive the trustor.
Do I need a federal tax number for the trust?
A federal tax number is not needed for a living trust for a
married couple until one of the trustors dies, or both trustors
resign as trustees or become incompetent. For a trust for a single
person, a federal tax number will be required after the trustor
dies. Until death or resignation, the trustors' Social Security
numbers will be used as the trust tax number.
What is a special needs trust?
The beneficiary of a special needs trust is usually receiving
benefits from a government program for the indigent. Those benefits
will stop if the beneficiary receives an inheritance because
these programs have strict limits regarding the amount of income
and assets that a beneficiary can receive. A special needs trust
provides a source of money that is held by the living trust and
paid in small amounts either to the beneficiary, or for his or
her benefit. The trustee will not pay any amount to the beneficiary
that would increase his or her income or assets beyond the limits
set by the government program and cause the government benefits
to stop. The trust can own certain assets that are available to the
beneficiary, such as a car. After the death of the beneficiary, the balance of the
trust fund will be distributed to other trust beneficiaries.
What is a Qualified Domestic Trust?
If the surviving spouse is not a U.S. citizen, no marital
deduction is allowed unless the assets to be transferred to the
surviving spouse are instead transferred to a qualified domestic
trust, also called a QDT. The marital deduction allows married
couples to transfer assets between themselves at death without
subjecting those assets to the federal estate tax. At least one
trustee of a QDT must be a U.S. citizen or a domestic corporation,
such as a bank or trust company. The trust document must also
provide the no distribution can be made from the trust unless
the trustee who is the U.S. citizen or domestic corporation has
the right to withhold federal estate taxes from the distribution.
Do I really need to read all of the pages of the
trust before I sign it?
Yes, although the trust may be lengthy, you are expected
to be familiar with its basic provisions and you should ask your
attorney for an explanation of any parts of the trust that you
do not understand. If a trustor does not understand the provisions
of the trust, it might be declared an invalid agreement if it
is challenged in court.
If I start a bank account for my trust,
will it be covered by FDIC insurance?
Yes, but the amount depends on the
number of trustors and/or beneficiaries.
More about FDIC insurance
Why should I use a restatement of a trust
instead of just an amendment?
It may be cheaper to rewrite the whole trust, and may
cost the same as amending a dozen different paragraphs of the trust.
More about restatement of trust
What is a disclaimer trust?
It reduces federal estate taxes and
allows the surviving spouse to decide whether it will be established after the
first spouse dies. More about disclaimer
What other documents should be part of an
Advance Health Care Directive and HIPAA authorization.
Durable Power of Attorney for Financial Purposes.
For more information, call Berge & Berge,
LLP at 408-985-9918.