PDF Summary:Make Your Own Living Trust, by Denis Clifford

If the prospect of lengthy probate court proceedings looms large in your estate planning, a revocable living trust offers a streamlined alternative to ensuring your assets are distributed according to your wishes while avoiding litigation. In Make Your Own Living Trust, Denis Clifford explains how to create a living trust independently, sidestepping the costs and complexities inherent in this process.

Clifford guides readers in determining which assets should be included, choosing beneficiaries, and designating a successor trustee to manage the trust upon your passing. He outlines key benefits, potential limitations, and ways a living trust can facilitate the distribution of your estate — even to youthful heirs.

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If you are grappling with a multitude of debts stemming from business transactions, medical expenses, or other causes, it may be wise to consider the manner in which the probate process can conclusively settle and confine your monetary liabilities within a designated timeframe. You can specify certain assets within the trust to be used for settling any debts, thus protecting your heirs from the burden of your financial liabilities.

Different Types of Living Trusts and Related Holdings

This section delves into the assortment of living trusts that are customized according to an individual's marital status and provides guidance on choosing which assets should be placed into the trust, following the recommendations of Denis Clifford. Denis Clifford highlights the benefits of a living trust, which not only allows one to bypass the probate process but also enables the distribution of assets to heirs who are under 35 years old.

Individuals have the capability to create living trusts on their own.

Clifford demonstrates how individuals can create a living trust independently, allowing them to avoid the probate process for their entire estate, even for assets jointly owned with siblings or other individuals. Establishing a trust enables you to specify precisely which beneficiaries will receive certain assets when you pass away.

Creating a trust that can be altered or rescinded by the grantor.

When establishing a living trust independently, make use of the single-person format provided in the book (Form 1). This uncomplicated framework enables the allocation of a portion or all of your assets to selected beneficiaries.

Moving a variety of assets into the trust.

You can transfer a part or all of your assets into your living trust. Clifford outlines a range of situations, including the ability to transfer your share of jointly owned property with a sibling into the trust. You can transfer your share of a partnership or your corporate stocks into the trust if your state's laws allow trusts to possess partial stakes in partnerships and companies. You maintain full authority to oversee the property once it's been transferred to the trust, which includes the ability to sell, mortgage, rescind the transfer, or gift it to someone else during your lifetime.

A living trust can be established by couples together.

Clifford explains the process by which partners, irrespective of their marital status, can establish a joint living trust to circumvent the probate process for their collective assets. In setting up a trust, it's crucial to manage asset ownership in such a way that upon the demise of one spouse or partner, the trust is split into two separate parts.

Understanding the difference between rights to property owned jointly and those owned separately is crucial.

The book delves into the complexities of sole or joint property ownership and the management of such distinctions through a trust created by spouses. Both partners have an equal stake in the assets they have accumulated together throughout their union. Assets obtained by one spouse prior to the union or through inheritance or as a gift are deemed to be owned separately by that spouse.

When the first spouse passes away, the trust is then split into two distinct entities.

The publication provides trust documents that contain specific provisions for beneficiaries designated by each partner. When one partner passes away, the assets held in the joint living trust are smoothly apportioned, leading to the creation of two separate trusts. Upon the passing of one spouse, the assets contained in Trust 1, forming part of the deceased's estate, become irrevocably fixed and are distributed strictly based on the directives specified within the trust document. The trust belonging to the surviving spouse, often referred to as Trust 2, includes their own trust assets as well as any part of the trust's assets left to them by the deceased spouse. The remaining individual retains the power to alter or entirely revoke the trust at any point during their life.

Identifying which assets to include in the trust.

This section provides guidance on determining which assets should be incorporated into your trust. The authors provide advice on discerning the assets that should be incorporated into a living trust and those that should be excluded. Clifford proposes that an asset's worth is connected to the costs incurred for its legal validation after the passing of its proprietor. To circumvent the lengthy probate proceedings for your substantial holdings, consider transferring them into a trust or exploring other options.

Distinguishing among various property categories

Clifford provides advice on how to carefully document and list the assets held in trust within the property schedule. It is essential to thoroughly document assets held in a trust, particularly those with accompanying ownership documents like deeds for real estate or stock certificates, to ensure they can be easily identified. The trustee is required to establish a new document signifying ownership for different property categories, which shows that the trust is now the legal holder of the property. For items such as furniture, decorations, artwork, and small watercraft that lack official titles, it is essential to compile a comprehensive list. While the act of passing on these possessions usually does not require extra paperwork in numerous states, some lawyers compose a "Property Assignment" to guarantee that the transfer of ownership is clear and indisputable.

Determining which assets should be incorporated into the trust.

In deciding what property should be in a living trust, Clifford says there's no reason to include items that will probably not be part of your estate at death - for example, property you frequently buy and sell, or items of relatively little value that won't cost much to transfer through probate - such as your personal checking account. However, he emphasizes the necessity of including your major assets in a living trust or transferring them via an alternative method that bypasses the official procedure of confirming a will's authenticity. Examples of property best suited for a living trust include: your house and real estate, stocks, bonds, mutual funds held by a broker, money market accounts, valuable jewelry, furs, artworks, and any interest in a small business or partnership. The book provides comprehensive guidance on how to allocate funds to heirs and outlines the process for channeling proceeds from life insurance into a trust set up for the benefit of a minor.

Taking into account the state-specific rules pertaining to assets held in joint ownership by married couples.

Couples should fully comprehend their state's specific laws on marital property before they complete the inventory of assets for their trust. These laws affect both what property you must leave to your spouse (and what you are free to give to someone else) as well as the basis from which profit is figured when that property is sold by the inheritor. Clifford distinguishes between two primary types of state-recognized marital property arrangements: the community property system, which stipulates that both partners have equal ownership of assets and income garnered by either one throughout the marriage, and the common law system, which attributes ownership to the spouse whose name appears on the ownership papers. To ensure that the entire value of a jointly owned asset is not subject to taxation, it must be demonstrated that the property was indeed a component of the marital estate, as Denis Clifford explains. Many couples choose to establish a joint living trust in order to avoid possible adverse tax consequences that can arise from owning assets together.

Deciding on trustees and identifying the beneficiaries of the trust.

Clifford delves into the essential duties of choosing beneficiaries for your living trust and appointing managers for its administration posthumously, emphasizing the deeply personal nature of these decisions during the trust's creation. The person you designate to oversee the trust upon your demise plays a pivotal role in ensuring a smooth transfer of your assets, and the decisions you make concerning the recipients will determine the distribution of your property.

Choosing a person or an organization to act as the substitute trustee.

Clifford explains that identifying a trustworthy and competent successor trustee is vital, as this person (or institution) will handle the administration of trust property and its transfer to your named beneficiaries. He assesses the responsibilities incumbent upon the successor trustee, deliberates on the option of designating multiple trustees in succession, and pinpoints circumstances in which selecting an institution to act as trustee would be suitable.

Responsibilities and powers conferred upon subsequent trustees.

The writer details the crucial duties a successor trustee is obligated to perform, and these duties differ depending on the characteristics of the trust. When one partner or spouse passes away, the surviving individual takes over the administration of the trust. Upon the passing of the second spouse or partner, the individual designated as the successor trustee assumes their role. When the surviving partner passes away, or if it's a trust managed by one person, the appointed alternate trustee takes over. Denis Clifford details the key responsibilities of a trustee, which encompass executing and recording measures that demonstrate the trustee's authority to manage the trust, including the formal declaration known as "Affidavit of Assumption of Duties by Successor Trustee," assessing the overall value of the trust's substantial assets, and complying with specific state requirements for the administration of the trust. The trustee's primary duties include the distribution of the trust's assets to the legitimate beneficiaries and the management and submission of required tax documents.

Challenges can arise if multiple people are designated to act in the capacity of successor trustees.

Clifford recommends thoroughly weighing the decision to appoint multiple successor trustees, despite the basic living trust documents allowing for such designations. The authors' main worry is that disagreements among trustees might result in postponements or complexities when it comes to distributing your assets to the designated beneficiaries. He recommends designating a single individual to serve as successor trustee to maintain unity, particularly when siblings stand to inherit equal portions of the trust. The trust document should explicitly specify the collective authority of multiple successor trustees and establish whether they have the capacity to act on their own or if they must obtain unanimous written agreement before taking action.

Exploring the possibility of using professional trustees.

The author delves into the possibility of appointing financial institutions like banks or trust corporations to act as successor trustees. Clifford acknowledges that people have the capability to manage the assets contained within a trust, yet he recommends against adopting this approach. Financial organizations that manage trusts frequently levy substantial fees for their assistance and might not offer the tailored care necessary for the unique needs of the beneficiaries, especially in the case of smaller trusts. He underscores the necessity of choosing a dependable individual who can assume the role of substitute whenever possible. However, Clifford emphasizes the wisdom of appointing a corporate trustee to ensure the involvement of a neutral party when suitable individual trustees are unavailable or familial disagreements arise.

Assigning specific persons to gain advantages.

This section provides guidance on choosing beneficiaries for your trust, outlining different groups to consider and aspects to assess when allocating your assets. Clifford emphasizes the need for clear and precise communication when identifying heirs and preemptively resolving possible disputes.

Direct bequests are made to both primary and secondary heirs.

Clifford delves into the concept of unconditional gifts, highlighting that when given to minors or young adults, arrangements can be established to oversee their management until the beneficiaries attain an age of greater maturity. You can choose multiple primary beneficiaries and allocate specific trust assets to a person or apportion the estate among several heirs in pre-established proportions. The authors also clarify the role of alternate heirs, who are poised to receive the inheritance should the primary beneficiary decease prior to your own passing. You have the liberty to designate distinct substitutes for particular bequests. For example, a man can specify that his children inherit the assets that would have otherwise gone to his wife, while his wife may choose her brother as the beneficiary of the estate that would have been her husband's, should he pass away first. You can also appoint multiple alternate heirs for each primary beneficiary, specifying how the assets should be distributed between them. Clifford advises careful consideration of every potential heir. Should your selected heirs and their backups predecease you, the property intended for them will be incorporated into the remaining estate, guaranteeing that it will not be inherited by those you did not intend.

When deciding on the allocation of assets to those who are either minors or just beginning their journey into adulthood, it is essential to consider specific considerations.

Denis Clifford offers an in-depth examination of various approaches, including the creation of trusts for minors and custodial agreements, for individuals planning to transfer trust assets to young people or teenagers until they mature enough to handle them prudently. In the legal paperwork that sets up your living trust, you can specify provisions for young beneficiaries, choosing who will receive the assets and at what age they will be entitled to them, provided that this age does not exceed 35 years. A trust that is set up to become operational for a beneficiary who is below a certain age will take effect only if the beneficiary has not yet reached that age when you die. In some states, the custodian generally transfers the property to the beneficiaries when they turn 18, but most states require this to happen at 21, with a handful allowing for the transfer to take place at ages as late as 25 or 30. State statutes, which comply with the Uniform Transfers to Minors Act, set the specific age at which transfers to minors may occur, and this age cannot be modified by the documentation included in this book. The authors provide a comprehensive examination of the benefits and possible drawbacks linked to custodial accounts and trusts established for young beneficiaries, assisting you in determining the most appropriate choice tailored to your specific situation.

Beneficiaries' disputes and disagreements

Clifford highlights the likelihood of conflicts stemming from presents allocated to several beneficiaries. The documents included with the trust do not facilitate prolonged supervision of property affairs after your passing. Beneficiaries must address and settle any issues that occur. If you name multiple beneficiaries for a house, for example, and some of the beneficiaries disagree about selling it or inheriting it, any beneficiary can, in most states, go to court to force a sale, with the proceeds divided among the co-owners. The writers emphasize the importance of assessing whether those who receive joint gifts can work together effectively.

Omitting a spouse or child from a bequest.

Clifford cautions about the potential complications that can occur if an individual decides to omit a spouse or child from their will. In common law states, legal constraints exist on the ability to disinherit your spouse, and while you can typically choose to leave no assets to a child, it is imperative to clearly articulate this choice in your will to avoid conflicts regarding your estate planning objectives. The authors clarify the intent behind these rules, highlighting their importance in protecting a spouse's economic security and preventing the unintentional disinheritance of offspring.

Following the demise of the individual who established the trust, it necessitates appropriate management.

Clifford provides a comprehensive explanation of the responsibilities that fall upon the successor trustee when it comes to finalizing a living trust, be it singular or joint, including specific instructions for the allocation of different asset categories to beneficiaries. He underscores the importance of diligence, rapid action, and seeking guidance from professionals when necessary to ensure that assets are allocated methodically and without delay.

The person designated to serve as the subsequent trustee is entrusted with particular responsibilities.

The authors provide a detailed overview of the responsibilities that fall upon the successor trustee after the death of the grantor, encompassing both the particular duties outlined in the trust and those required by state legislation. Clifford details the key duties including procuring official copies of the death certificate, formulating and filing documentation to confirm the trustee's power, informing the trust's beneficiaries about their entitlements, and allocating the trust's resources to the rightful inheritors, in addition to managing assets kept in trust for minors and finalizing all required tax filings. He emphasizes the critical responsibility held by the trustee to accurately assess the value of the trust's holdings after the death of the grantor, a step crucial for documenting the property's enhanced basis for the beneficiaries, which in turn can diminish their capital gains tax liabilities.

Assets are distributed to the beneficiaries.

Clifford provides guidance on the allocation of different asset categories from a trust to its recipients. Transfer possessions that don't require a title, like home furnishings, directly to the chosen heir. Should the beneficiary live far away, the trustee has the discretion to determine if it's more practical to allocate trust funds for the conveyance of the property to the beneficiary or to proceed with the sale of the property and subsequently distribute the proceeds to the beneficiary. The person responsible for the trust must generate and finalize new ownership documents, including those for bank accounts, securities, or real estate, to ensure the assets are transferred from their stewardship of the trust to the beneficiary. The individual overseeing the trust frequently must work in conjunction with different banks and governmental agencies to effectively change the title of assets, since the procedures for doing so can vary.

Completing the necessary tax documentation

Clifford highlights the responsibility that falls on the successor trustee to oversee the completion and submission of the final tax documents of the person who has passed away, often working in conjunction with the executor of the will. In some regions, it is mandatory for the executor to file the final federal and state income tax forms of the deceased, along with any applicable state inheritance or estate tax documents. The authors emphasize the importance of meticulousness in these issues and suggest obtaining guidance from a qualified professional, like an attorney or financial analyst, when required. The assets contained within the trust are responsible for covering any professional fees.