Torrance, Los Angeles, Long Beach and Pasadena

Basically there are two types of revocable living trusts for married couples. The first type is called a simple or basic trust. With a basic trust, while both spouses are living, they continue to manage the estate together as they had before creating the trust. Upon death of one spouse, the surviving spouse has sole and absolute control over the estate. When the second spouse dies, the assets are distributed to their heirs as directed in the trust.

The single trust is advisble for husband and wives whose estates mee the following conditions:

1. The combined estate is under the estate tax exemption (Currently $5,125,000 in 2012) and will never exceed the tax exemption.
2. The spouses are willing to allow the surviving spouse to have full control and unrestricted use of the trust assets after the death of one spouse.

If the estate is over the tax exemption, or could grow past it, or if the spouses want to put restrictions upon the estate once one has died, then the couple would need to go through advanced estate planning to make sure they minimize taxes, and use an A-B Trust (although if an estate is particularly large, additional strategies would be put in place).

An A-B Trust is a means of dividing a “husband and wife” estate into two trusts upon the death of one spouse. The main purpose of using the this type of trust is to prevent losing any portion of the federal estate tax exemption when the first spouse dies.

For example, let’s assume that a married couple have an estate valued at $10,000,000. If the husband dies, leaving the estate to the wife and the wife dies after, leaving the estate to the children, the children will pay taxes on the amount over the exemption.

If, however, upon the husband’s death the estate was split into A-B Trusts, this way each would be able to pass $5,125,000 (2012 estate tax exemption) to the children tax free, with no taxes due at all.

Photo by Ernst Vikne

Yes. A single person can create a Revocable Living Trust. The more important question is “Should a Single Person create a Revocable Living Trust?” The answer to that is also a resounding, YES!  

In fact, it is much more important for a single person to have a Revocable Living Trust, than it is for a married couple. This is because sigles need to name someone to handle their affairs in the event that something happens to them. Married people might have some more flexibility depending on how property is owned, or assets are held. But the bottom line is that EVERYONE need to have a trust.

A single person would name in his or her trust the person or people who will handle the estate not only in the event of incapacity, but also upon death of the single person. It’s extremely important to note that a trust also contains items such as health care directives, and other documents, which clearly state how you want medical decisions to be made and who is the person you want making them.  This aspect of a trust often overlooked, because most people’s primary focus is on protecting assets so that they can be passed on, and not what would happen if they were suddenly unable to make medical decisions for themselves.

If a trust is not in place, then someone must apply to the court for Conservatorship. These are some of the typical issues associated with Conservatorships:

1. A conservatorship is expensive and time consuming and requires at least biannual accountings.
2. You may end up with a conservator you would not have chosen.
3. You may require a team approach to handling your affairs and medical decisions, not just a single conservator.
4. There may be a battle over conservatorship resulting in legal fees that will be paid from your estate.