Revocable Living Trust Attorneys in Michigan
The easiest way to understand a living trust is to realize that it’s simply an agreement between two parties. The first party, the trustor(s) or grantor(s), establish the trust, while the second party, the trustee, is a person, bank or other group who manages the assets contained in the trust.
The rules or instructions for managing the trust are contained in the trust agreement. In the most common case, that of a trust agreement made by a couple, it governs how the trust operates when both trustees are alive, what happens when the first dies and how the assets are divided upon the death of both. The trust agreement explicitly covers who serves as trustee and successor trustee, who receives the assets when the trust comes to an end and any payments to be made from the trust. Since a portion of the trust becomes irrevocable when the first spouse dies and cannot be changed, decisions made when the trust is created must be carefully considered.
The established trust is a revocable trust as long as both spouses survive. During this time, the couple may amend it, buy and sell assets contained in the trust or even cancel or revoke it entirely.
While the husband and wife are both alive, it is not legally required for them to keep records. The original trust normally includes a list of assets initially placed in the trust, and that list should be reviewed periodically so that any newly acquired assets can be titled properly in the name of the trust. When both die, the successor trustee, named in the trust by the grantors, will be able to determine what assets the trust contains.
As long as the trust is revocable and either the husband or wife serves as the trustee or co-trustee, the trust does not require a separate tax return or tax ID number. The couple continue to report all taxable income, dividends, capital gains and interest on the couple’s personal tax return using the husband’s or wife’s Social Security number, but they need not refer to the trust in their tax returns.
The trust, obviously, must contain some assets, and the assets included in it must be titled in the names of the trustees. As an example, assets would be titled as “Steve A. Sample and Sherry B. Sample, Trustees of the Steve A. Sample and Sherry B. Sample Trust, dated January 9, 2000.”
Real property needs to have a deed recorded in the name of the trust. This does not trigger a reassessment of the property’s value. Bonds and stock certificates must be re-registered in the name of the trust and mailed to transfer agents. Any limited partnerships contained in the trust need to be contacted so that the title for those assets can be changed as well. Accounts in banks, savings and loans and credit unions must be changed if they’re included in the trust agreement, and stock brokerage accounts must be transferred and placed in the names of the trustees. Failure to include such assets in your living trust can subject them to the probate process upon the death of their owner.
The trust should be named as beneficiary of life insurance policies so that the proceeds will be made payable to it and not the grantor(s) individually. Profit sharing plans, IRA accounts and 401k plans, because of their special income tax features, should also name the trust as the beneficiary.
The husband and wife together can withdraw as much as they wish from the trust. The list of assets contained in the trust does not need to be updated if any interest of dividends, or even any funds, are taken out of a trust itself or any bank, savings and loan or credit union account it contains.