Trusts and wills are two means of passing upon death.
What is a trust? - A trust is an agreement between a
grantor and the trustee. In the trust agreement, the grantor can
tell the trustee to manage a distribute the trust assets. For
example, the grantor can put cash, stocks, bonds, real estate or
other assets in the trust. The trust agreement tells the trustee
what to do with the trust assets. This only applies to the
assets which are held in the trust.
What are
the requirements for a trust? - The Grantor must have:
•
A person to
set up the trust - The "Trustor", "Grantor" or "Settlor"
•
A trustee -
The person who operates the trust. The Trustee can be the
Grantor, another individual or a licensed bank or trust company
(corporate trustee). The advantage of a corporate trustee is
they never die or become incapacitated.
•
A trust
agreement - The Grantor's instructions
•
Beneficiaries - People who receive the benefits of the trust.
For example, the beneficiary may be entitled to receive a
distribution upon the death of the Grantor.
What is a living trust? - A living trust created during
the Grantor's lifetime. It may also be called a "Grantor Trust",
a "Revocable Trust" or an "Inter Vivos Trust".
Can the grantor change their trust? - A revocable trust
means that the grantor can change their mind - and their trust.
The Grantor can revoke the trust or amend it. This means they
can cancel the trust and get their property back. The Grantor
can also change the instructions contained in the trust
agreement.
The Grantor can also make an irrevocable trust, one in which the
Grantor cannot change their mind. Once the Grantor sets up an
irrevocable trust, they can never change it. The Grantor of an
irrevocable trust cannot cancel the trust or change the
instructions.
What are the advantages of a living trust or will?
Privacy. A living trust is not usually filed in court
to become a public record. However, in many cases, an
inventory must be filled with a court upon death. The
inventory will at least show the size of the trust and may be
required to list the assets. The inventory is used for
inheritance tax determination and is a public record. The
amounts received by each beneficiary may also be a public
record.
Avoid Probate. Assets in a living trust usually avoid
probate at death. However, Nebraska has the Uniform Probate
Code which considerable simplified probate. Remember, the
assets must have been transferred into the living trust to
avoid probate.
Disability. A trustee can continue to manage trust
assets (those actually transferred into the trust) if the
Grantor becomes disabled without the court appointment of a
conservator. However, a durable power of attorney may provide
the same benefits.
Asset Management. If the trustee is an expert,
professional management of the trust assets may be available
for a fee.
What happens to property not placed into the trust? - If
the ownership of all the property is not transferred to the
living trust, it remains subject to the normal rules for
transfer of property at death and might be subject to probate.
Can a trust be put into a Will? - Yes, a trust can be
created under a Will. This is called a "Testament Trust".
Can a living trust be a beneficiary under a Will, life
insurance policy, annuity or pension? - A living trust may
be named as a beneficiary of a Will. In most states, a living
trust can be a beneficiary of a life insurance policy or
annuity. A living trust can also be the beneficiary of a pension
plan or other employee benefit plan if the spouse dies before
the grantor. If the spouse is living at the death of the
grantor, federal law requires the spouse to be the beneficiary
of the pension plan or any other employee retirement plan,
unless the spouse agrees in writing on a special notarized form.
Can a trust be contested? - Yes, it is possible to
contest a trust. With a trust, the court may require all of the
beneficiaries to be each named as parties to the lawsuit.
Will a living trust save on taxes? - Using a trust
instead of a Will does not save any taxes. It is not whether a
Will or a trust is used which determines taxes saved; it is HOW
the Will or trust is used which may save taxes.
