Law offices of Leah L. Dixon Law offices of Leah L. Dixon
Law offices of Leah L. Dixon Law offices of Leah L. Dixon

Trusts


With simple estate planning you can ensure that your property passes to those who you want to have it, or those who need it most. With a properly funded living trust, your estate will avoid excessive probate fees. You can designate the beneficiaries of your estate, name a guardian for your minor children, plan for your incapacity, and name an alternate trustee who will carry out your wishes when you cannot.

What is a living trust?
What are the benefits of a living trust over a Will?
What happens after I create a living trust?
Will I also have a will if I create a living trust?
How will things change in the day-to-day management of my assets after
I create a living trust?
What is probate?
What are probate fees?
What happens if I die without a will or trust?
Can I decide who will take care of my children after my death?
What is a trustee?
Who should be my successor trustee?
What are the duties and powers of the trustee?
What are Federal Estate Taxes?
What if I have a large estate?

What is a living trust?

A living trust, or an inter vivos trust, is a trust created during your lifetime. In general, a living trust is an arrangement where property is transferred with an intention that it be held and administered by you for the benefit of another. A living trust is a will alternative and it is revocable.
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What are the benefits of a living trust over a Will?

With a revocable living trust, you will avoid probate administration fees after your death and set in place a mechanism for managing your property while you are living in the event you become disabled.

Once your will is probated, it will be part of the public record. A living trust does not become public record and thus is a more private means of transferring your assets at death.
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What happens after I create a living trust?

Once you create a trust, you will need to “fund” it. You have to transfer the assets that will go into the trust from your name to the name of the trustee under the trust. Deeds to real property must, therefore, be prepared and recorded, bank accounts transferred, and stock and bond accounts or certificates transferred as well. We will guide you through this process and be available to address any questions and concerns that may arise during the funding process.
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Will I also have a will if I create a living trust?

Even if you create a living trust, you will still have a will. Not all of your property will be put in your living trust (some examples, cars, personal property, etc.). The will created in conjunction with your living trust is called a “pour-over will”- which means it “pours over” all of your assets into your trust at death to be administered by the terms of your trust.
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How will things change in the day-to-day management of my assets after I create a living trust?

Because you will most likely be named as the trustee of the trust, nothing much will change in terms of your day-to-day management of your assets. Your trust will not have to pay or file separate income taxes, they will be included in your own. After you fund the trust (transfer your assets into the trust), the only ongoing change is that if you purchase new real estate and plan to hold onto it, you should hold it in the name of the trust.
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What is probate?

Probate, or the administration of the deceased’s estate, is the process of collecting and preserving the deceased’s assets, paying the debts of the deceased and distributing the assets of the deceased to those legally entitled to them.
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What are probate fees?

Once you are deceased and your estate enters probate, your estate will incur costs. Both the executor of your estate (which you name) and the attorney for the executor are entitled to compensation which is set by statute for their ordinary services. The compensation received is based on the size of your probate estate which consists of all property which must pass through probate. The current compensation for both the executor and the attorney for the executor is as follows:

4% of the first 100,000
3% on the next 100,000
2% on the next 800,000

For example, if you die with an estate worth $200,000, both your executor and the attorney for the executor would each receive $7,000, which totals $14,000.


Probate fees are avoided when you have a properly funded living trust. Keep in mind, however, that you may still incur attorney’s fees after your death even if you have a living trust because some trusts will require the assistance of an attorney to complete the administration of the trust.
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What happens if I die without a will or trust?

If you die without a will, you die “intestate”. If you die intestate and have property that needs to be distributed, the property will pass by the state’s intestate succession laws- giving your heirs, if you have any, your property. Please contact our offices if you would like more information on intestate succession and a better understanding who would receive your property if you were to die without a will.
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Can I decide who will take care of my children after my death?

In your trust, you can nominate a guardian for your minor children. In case of the joint death of you and your spouse, your minor children will need a guardian to care for them. A guardian has the authority to care for your minor children and exercise the rights the parents would have had when living.

While your nomination does not bind the court, the court will give “due weight” to your wishes. If you and your spouse or the other parent of your minor children both die before your children reach the age of 18 and you have not named a guardian, your choice of who should care for your children when you are not there might never be known. The court may appoint a guardian to your children who would have been unacceptable to you.


The only way to ensure that the court hear your opinion on who should raise your children in the event you and the other parent are deceased, is to nominate a guardian for your child as you can do in a will.
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What is a trustee?

A trustee will administer the trust. Initially, it will most likely be you, the settlor of the trust. When you become incapable of managing your affairs, or upon your death, the person you name as successor trustee will then take over the administration of the trust. If you are married and part of your trust “corpus” (property) will consist of community property, that is property of both you and your spouse, then both you and your spouse will be trustees of the trust.
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Who should be my successor trustee?

Your successor trustee should most likely be the same person you name to be your attorney-in-fact in your Durable Power of Attorney for Health Care. This person should be someone whom you trust.
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What are the duties and powers of the trustee?

The basic duty of the trustee is to administer the trust according to the directions set forth in the trust instrument. The trustee has the duty to act with reasonable care, skill and caution under the circumstances.
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What are Federal Estate Taxes?


The Federal Estate Tax is a tax applied on all estates (which consists of the money and property you own when you die) over a certain limit. Most people die with estates that do not owe any estate tax. Currently, the number at which the estate tax applies is increasing up until 2009. The estate tax is to be repealed for estates of people dying in 2010, but it is not certain that this repeal will actually take effect and how long the estate tax will be repealed (as it is now, the tax will be repealed for one year and will then revert back in 2011). Due to these uncertainties in the law, planning for large estates is complex and any estate plan drafted now will need to be reviewed once the law becomes more settled.

The current schedule for the “unified credit” which is what allows you to pass property without being subject to the federal estate tax is as follows:

Year of death
Size of estate that will avoid federal estate tax
2004, 2005 $1.5 million
2006, 2007, 2008 $2 million
2009 $3.5 million

If you die during the years of either 2004 and 2005, you can pass $1.5 million without be subject to federal estate tax. If you die within the years 2006, 2007, or 2008, you can pass $2 million without paying federal estate taxes. If you die in the year 2009, you can pass $3.5 million without paying federal estate tax.

If you have a large estate, you should not count on outliving the federal estate tax as most commentators do not think the estate tax will end altogether in 2010. If you have an estate that might be subject to these taxes, you should contact our offices for more complex estate planning options.

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What if I have a large estate?

If your estate might have to pay federal estate tax and you are concerned about avoiding this tax, please contact our Offices to obtain more complex estate planning procedures than are offered on this site.
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