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John Gibson
John Gibson is a senior partner in the Wichita law firm of Gilliand & Hayes. He has been practicing law for nearly 30 years. In addition to healthcare law his practice includes wills, trusts, estate planning, probate and general representation of individuals and small business. Contact information: Phone: 316-264-7321; Fax: 316-264-8614; and e-mail: jgibson@boyerds.com
Legal
2001-11-01 17:37:00
We have a will... do we need a trust?
Question: We have been married for nearly 60 years and are both in our early 80's. We have 1300 acres of farm ground and 320 acres of pasture land. Our home and out buildings are probably valued at around $200,000. Our farm equipment is worth around $100,000. We have CDs in the amount of around $800,000. We have 6 children, all grown. Our second oldest son takes care of the farm and cattle. We want our children to equally have all of our property after both of us have passed away. We both have a will. Do we need a trust? If so, what kind and why?
Answer: From the information you have provided the answer is yes, you and your children can benefit from a trust, and perhaps save a lot of money by having a trust. As I will discuss below a living trust not only can save money, but can assure you that your property will be properly managed and will be used to care for you as long as either of you is alive.You are facing three separate issues: The first issue is how best to preserve and manage your property for your benefit as long you are alive, and if you become incapacitated? The second issue is what is the best and most efficient way to assure your property is distributed to your children upon your death? The final issue is taxes. Will your estate owe federal or state death taxes? And if so, is there something you can do about it?When a person is incapacitated or dies owning property (real or personal), the law will provide a caretaker for that property. The caretaker is a court-appointed guardian and conservator if the person is alive, or a court-appointed estate administrator when the person dies. If the person has not named a caretaker, the law steps in to do so. If, on the other hand, the person has a trust or will, the state will step back and allow the person's own choice of caretaker to govern.While most people know that a will can be used to select a caretaker for their property after their death, few people are aware that a trust can provide a choice of caretaker for their property while they're alive. That caretaker - called a trustee - can even be themselves or a trusted professional. All that is needed to create a trust is a person with property and a trustee for that property.The most common type of trust is a "revocable" trust, meaning you have the power to revoke or change the trust anytime you wish. The revocable trust is also sometimes called a "living trust". It has this name because it is established and operates while you are alive. You put your property in a living trust and still maintain control over it as trustee. Most important, the trust document provides for a successor trustee who will assume control of the property. What is the advantage of this? If you are incapacitated, your family does not have to apply to the court for a conservator or guardian to be appointed. The successor trustee simply takes over. The same is true after you die. The successor trustee simply carries on without missing a beat - no court-appointed administrators or executors are needed. Your property stays out of probate, saving your heirs time and money. Living trusts are quite versatile because they can be changed at any time. You can direct that property be transferred into and out of the trust as your needs dictate. Successor trustees and the powers of the trustee can be changed at any time by you.There also are significant estate tax advantages to be gained from certain types of revocable living trusts. Your estate presently is in the taxable range and even though significant changes are taking place over the next few years in the estate tax laws, you should keep taxes in mind as you do your estate planning. A type of revocable living trust referred to as an "A-B Trust" or a "Marital Deduction Trust" could possibly carry a distinct tax advantage in your situation. There are several variations of this type of trust that could provide advantages to you. Certainly, your estate could benefit tax wise from a properly prepared trust.Trusts are sophisticated legal documents and they should be prepared only by professionals. Together with a will that simply leaves everything to the trust - called a "pour-over" will - they can provide a complete estate planning package. An estate plan that will guarantee your property is used properly to take care of you while you are alive, that will distribute your property to your children exactly as you wish upon your death, and that could save significant taxes.
 
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