Q. What types of revocable trusts are there? 
A. There are a few typical types of revocable trust.  The first of which is the Survivor’s trust (with power of appointment).  This type of trust is set up with the Decedent’s half of the estate and the Surviving Spouse’s half of the estate being channeled into what we call a “Survivor’s Trust”.  The Decedent leaves his or her half of the estate to the Surviving Spouse to do with what he or she chooses to do.  This is more appropriate for families without previous marriages and for estates that currently are not above $2,000,000 (the current Federal Estate tax exemption amount).  The Surviving Spouse (if a U.S. Citizen) gets an unlimited marital deduction for the assets transferred to him or her by the Decedent.  However, this may swell the Surviving Spouse’s estate and if he or she were to pass soon thereafter, there could be a big tax hit (depending upon the size of the estate).

The second type of typical revocable trust is the A/B trust.  In this type of revocable trust there is a Survivor’s trust just as discussed above which contains the Surviving Spouse’s half of the estate (and any separate property of that spouse), but the Decedent’s half of the estate is transferred to what we call a “B” or “Bypass” trust.  The “B” trust becomes irrevocable at the time of the Decedent’s death (the first spouse’s death).  At the time the trust is drafted, the beneficiaries are chosen.  The Surviving Spouse usually retains what we call an “ascertainable standard” access to the “B” (Bypass trust).  This means that he or she has the right to money from the “B” trust for health, education, maintenance, and welfare up to and including all principal if necessary to sustain them.  It is a nice way to provide for the Surviving Spouse but at the same time designate children or other desired successor (remainder) beneficiaries to take the Decedent’s half of the property.

A third option for a revocable trust is the QTIP trust.  A QTIP trust operated much the way the A/B trust operates above, but is even more flexible than the A/B trust.

Q. What is the current estate tax exemption amount per person and what is the tax rate? 
A. The current (2006 and 2007) exemption amount is $2,000,000 per person and the tax rate is 45% for assets in the estate above the $2,000,000 exemption amount.

Q. How is a revocable living trust funded? 
A. That depends on the type of assets you are dealing with.  For real estate (within California), a Grant Deed transferring the property to the trust along with a Preliminary Change of Ownership report should be drafted by an attorney.  For bank accounts, most financial institutions have their own custom forms they wish their account holders to fill out in order to change the name on the account to the trust.  It is as simple as providing them a Certification of Trust along with the name of the trust in most cases.  Most financial accounts will list the trustees’ names as trustees of the “Jones Family Trust” dated _______ (date of execution of the trust) for example.  For IRAs, 401Ks, pension plans, and life insurance policies, the back-up beneficiary can be listed as the trust (this may or may not be appropriate depending upon your individual financial circumstances).  Personal tangible property (property without a title document) is most commonly transferred to a trust by way of a notarized Assignment document.  There are other specific procedures for specific types of assets such as stocks, bonds, planes, boats, etc.

Q. Can I designate a successor guardian for my minor children?
A. Yes.  However, the Court must approve the designation should you and your spouse ever become incapacitated or die.  In such an event, the guardianship document should then be filed with the Court.  The Court normally gives deference to the parents selection for successor guardian(s).  They just need to check out the nominated guardian’s background and situation to confirm the nomination is appropriate (e.g., the person has not been arrested or convicted of a sex crime, etc.).