A trust is merely an agreement, like a contract, between two parties. The person establishing the trust (the “Settlor” or “Trustor”) and the person holding the property (the “Trustee”) hold property for the benefit of another (the “Beneficiary”). In a typical living trust, these three legal “persons” are the same person; you. The term “living trust” means that the trust is established and funded during your lifetime, as opposed to a testamentary trust which is created in your will and must go through probate to be funded. In order for a trust to be a valid, binding instrument; all that is necessary is for the parties executing it to have the legal capacity to enter into a contract, including age and competency, and for the trust to actually own something (the “corpus”). To fund the trust, you can assign, deed and transfer your assets into the existing trust, including your real property. Once the trust is signed, dated and acknowledged by a Notary Public, it is in full force and effect. Neither your trust nor your will need to be recorded, with the exception that the deed transferring real property is usually recorded with the applicable Recorder’s Office.

You should decide on:

1. Who will be the successor Trustee in the event of death or incapacity;
2. If you have minor children, who should be the Guardian;
3. Who will make health care and financial decisions for you if you cannot make them yourself; and
4. How your estate will be distributed at your death.

We can draft a Trust Restatement. A Restatement completely amends and rewrites your estate plan; so it will have all the new language if there have been any legal changes which would affect your trust; and will allow you to implement any changes you need to make to keep your trust current. However, the Restatement keeps your existing trust name and date, so you do not need to re-title any of the assets already titled in the name of the existing trust.

Yes. But your family may not like it. The government’s estate plan is called Intestacy and guarantees government interference in the disposition of your estate. Documents to appoint an Administrator must be filed with the Probate Court and their approval must be obtained. If you fail to plan for your estate; you lose the opportunity to protect your family from a complex process that can be timely and costly; and which might have unwanted consequences in the distribution of your estate. Additionally, you have to consider estate taxes. There is much you can do in planning your estate that will reduce and can even eliminate estate taxes.

A Will is a legal document that describes how your assets should be distributed in the event of death. The actual distribution, however, is controlled by a legal process called probate, which is Latin for “prove the will.” Upon your death, the Will must be filed with the Probate Court and becomes a public document available for inspection. Probate can be cumbersome, time-consuming and expensive. A Living Trust avoids probate because if your assets are properly placed in the trust, the trust becomes the owner of that asset. Like a corporation, a trust is not a living person, so if your trust owns your assets, technically there’s nothing for the probate courts to administer. Whomever you name as your “successor Trustee” gains control of your assets immediately upon your inability to act as Trustee and they are to distribute your assets exactly according to your instructions. There is one other crucial difference: A Will doesn’t take effect until your death, and is therefore no help to you during lifetime planning, an increasingly important consideration since Americans are now living longer. A Living Trust offers protection should you become disabled or incapacitated. Please note that even with a Living Trust, you should still have a Will known as a “pour-over will”; which makes sure that any assets not in your Living Trust at the time of your death, “pour-over” into the trust to be distributed with the other trust assets. Your comprehensive Trust Package will include all of the necessary estate planning documents including a “pour-over will.”

A “probate avoidance trust” which continues everything in a single trust for the benefit of the survivor who maintains the complete right of change and/or revocability. Typically, this type of a trust is utilized when there will be no possibility of estate tax and there is no issue about the control the survivor will have over the entire trust.

A “disclaimer trust” which is like the probate avoidance trust, except the surviving spouse has the opportunity to disclaim any portion of the decedent’s estate into an irrevocable tax avoidance sub-trust. This sub-trust is created, if necessary, by the terms of the trust after the first death, and then passes tax free at the survivor’s death. This is a very useful trust given the uncertainty of the estate tax laws and the likelihood that most estates will not actually require the creation of a separate trust for tax purposes; it defers the decision of what estate tax planning is necessary until the time of the first death, when the size of the estate and the exact nature of the tax laws are clearly defined. Typically, this type of trust is utilized when there is no concern with the survivor having full control over the trust.

An “A/B Trust” is called that because, at the first death, the joint trust splits into two sub-trusts (originally labeled the “A Trust” and the “B Trust.” The deceased spouse’s sub-trust (which we call the “Decedent’s Trust” or “B Trust”) is funded up to the maximum amount which can pass tax free in the year of death (currently $11.7 million) and the surviving spouse’s sub-trust (named as the “Survivor’s Trust” or “A Trust”) receives the balance. The Decedent’s Trust is irrevocable and is held for the lifetime of the surviving spouse (typically, the survivor is the sole Trustee and has the right to all of the income and the right to use any or all of the principal of the sub-trust for her/his benefit); however, this sub-trust can be protected from creditors of the surviving spouse (including the “spend-down” for Medicaid) and survivor cannot leave the assets of the Decedent’s Trust to anyone other than the children. The balance in the Survivor’s Trust qualifies for the unlimited marital deduction and no tax is due at the first death. At the death of the survivor, what is in the Survivor’s Trust is subject to tax, but only to the extent that the total is above the exemption amount in the year of the survivor’s death. The Decedent’s Trust, because it was already subject to tax at the first death and because it is an irrevocable trust, passes estate tax free at the second death. Because of the higher exemption amount and the loss of a potential income tax benefit at the death of the surviving spouse (i.e., step-up in basis), this type of trust is not recommended for most situations (although it may still be beneficial for “non-traditional” couples).

With the 2010 Tax Relief Act and the American Taxpayer Relief Act of 2012, a new type of trust called a “Marital Deduction Trust” is now our recommended choice for many estates. At the first death, the joint trust again splits into two sub-trusts; the deceased spouse’s sub-trust (which we call the “Decedent’s Trust”) is funded with the deceased spouse’s estate up to the maximum amount which can pass tax free in the year of death (currently $11.7 million) and the “Survivor’s Trust” receives the survivor’s estate. As with the “A/B Trust,” the Decedent’s Trust is irrevocable and is held for the lifetime of the surviving spouse (typically, the survivor is the sole Trustee and has the right to all of the income and the right to use any or all of the principal of the sub-trust for her/his benefit); as with the A/B Trust, this sub-trust can be protected from creditors of the surviving spouse (including the “spend-down” for Medicaid) and survivor cannot leave the assets of the Decedent’s Trust to anyone other than the children. The balance in the Survivor’s Trust qualifies for the unlimited marital deduction and no tax is due at the first death. At the death of the survivor, because the Decedent’s Trust is treated as part of the survivor’s taxable estate (even though no tax must be paid), the assets in this trust receive a new basis adjustment (a “step-up”) and the heirs can sell the entire estate with no capital gains tax.

Another version, the “ABC Trust,” has the excess of the deceased spouse’s estate above the exemption amount going to another sub-trust often called a QTIP (“qualified terminable interest property trust” – which we label as the “Marital Deduction Trust”). The Decedent’s Trust (as well as the Marital Deduction Trust, if applicable) is an irrevocable trust held for the lifetime of the surviving spouse. Typically, the survivor is the sole Trustee and has the right to all of the income and the right to use any or all of the principal of the trust for her/his benefit; however, the survivor cannot leave the trust to anyone other than the beneficiaries initially named. The balance of the assets which are not allocated into the two irrevocable trusts are placed in the Survivor’s Trust which qualifies for the unlimited marital deduction and results in no estate tax at the first death. At the death of the survivor, what is in the Survivor’s Trust is subject to tax, but only to the extent that the total is above the exemption amount in the year of the survivor’s death. The Decedent’s Trust, because it was already subject to tax at the first death and because it is an irrevocable trust, passes estate tax free at the second death. The Marital Deduction Trust is only subject to tax to the extent that it and the Survivor’s Trust exceeds the available exemption amount at the time of the survivor’s death.

You are not required to try to figure out the correct type of trust for you; we will determine which is the best type of trust for your situation based on your responses to certain questions, as well as the most up-to-date status of the federal and state tax laws.

This form may be used to transfer all savings bonds, including Series EE, Series E, Series HH, Series H, and Series I. Use Form PD F1851 to describe the bonds. If more than 13 bonds are to be transferred, use Form PD F 3500 (Continuation Sheet for Listing Securities).

You should be aware, also, that your signature (as the bond holder) must be certified by a certifying officer (this includes authorized employees of insured depository institutions and corporate central credit unions). For a complete list of certifying officers, see Department of Treasury Circular No. 300 31CFR Part 306. This is not the same as having your signature acknowledged by a notary public.

Since you will be transferring your savings bonds through the mail to a Savings Bonds Processing Site (there are five sites specified in the instructions), you should send them by registered or certified mail with a return receipt requested.