The decision to create a trust is a weighty one and inevitably comes with a great deal of questions. Check out part one here. In part two, we anticipate and answer some of the most common questions about trusts. Because individual circumstances differ, you will likely need to consult with an attorney about situations that are specific to you.

1. Can I be my own trustee in a revocable trust? Yes. Being able to serve as trustee is one of the big advantages of having a living trust. In this way, you retain control over your assets until your death or incapacitation. You should nonetheless name a successor trustee to ensure that someone will continue to manage your assets smoothly if you are not able.
2. Can I transfer property in and out of the revocable trust? Yes. The authorization to make changes to your trust is another significant advantage of a revocable/living trust. If you appoint yourself trustee, you will still have control over the assets and can change them at will. Keep in mind that it is not as simple as striking out a provision or clause in adding or divesting of a trust of certain assets, but it can be done.
3. When should I update my revocable trust? Consider updating your trust when:
   1. there’s been an addition to your family or a death that might affect distributions.
   2. if you get married, divorced or remarried.
   3. your assets have changed substantially (whether an increase or decrease).
   4. you move to a different state or country.
   5. your trustee or successor trustee becomes incapacitated or dies.
   6. when changes in the laws make certain distributions impossible or unfavorable.
   7. if your spouse qualifies for Medicaid.
4. Can I avoid taxes with my living trust? Revocable Trusts (i.e. Living Trusts) do not help avoid federal or state income tax generated by the assets, but they are used to eliminate or reduce Estate Taxes upon the second spouse to die in a marriage.
5. Does a living trust protect assets from creditors? No. Because the grantor can change or terminate a living trust at any time and retains control of the assets, the law views the property as belonging to the grantor. An irrevocable trust, however, protects assets from most creditors.
6. Why should I consider an irrevocable trust? An irrevocable trust permanently transfers legal ownership of assets to the trust. Consider making an irrevocable trust when you seek to save money on estate taxes, qualify for Medicaid, protect assets from creditors, or wish to create a long-term trust for descendants (legacy trust). Because a grantor cannot change this kind of trust, the IRS does not consider its assets part of the grantor’s estate. Accordingly, they don’t include these assets in the grantor’s taxable estate after the grantor’s death.
7. Are there any circumstances where an irrevocable trust can be modified? An irrevocable trust can be modified or changed only in specific and limited circumstances. For example, depending on the state, such as New Hampshire, an irrevocable trust sometimes may be “decanted.” A trustee or beneficiary might be able to decant a trust to move it to a state with more favorable tax laws or put the assets into a new trust with modified language. A court may also modify or revoke a trust if unforeseeable circumstances, such as a change in federal or state laws, impede the trust’s original intent. But a grantor should generally assume that once made, an irrevocable trust cannot be changed.

Questions? Contact us.