Dear Liza: I’ve just completed my estate planning documents using the latest edition of WillMaker Plus, including the will, health care documents, power of attorney, final arrangements, etc. I think all totaled it comes to over 65 pages. I’d like to leave all the documents well-organized so they’re not just a pile of papers that would overwhelm the executor. I’d like to put the documents in a three-ring binder with a table of contents and tabbed for the different sections. Is it legal to hole-punch these documents, either before or after they’re singed and notarized? Would that vary by state? I have never heard of any law that would invalidate documents that were otherwise valid because there are physical holes in the paper. Sometimes my clients make a copy of their documents, hole punch those, and put the copy in a binder, then put the originals in a safe deposit box or safe in their house. It’s great that you are trying to make things easier on your loved ones. Here’s a few other things you could put in the binder: a list of your passwords to online accounts; a list of your accounts, life insurance policies, and other assets; contact information for your heirs and beneficiaries; and a list of people that you work with, if any, such as tax preparers and financial advisors.
Tag Archives: living trusts
Dear Liza: I am trying to prepare a living trust on behalf of my father. He owns his home and vehicles outright and also has two bank accounts. I am the POD beneficiary of all of his accounts, as well as being a secondary signer on his checking and savings accounts. My confusion comes from not knowing what assets should be put in the living trust. Should it just be the home, since that has the highest value? Or should the cars and bank accounts also be included? Or can everything but the house be designated in the pour-over will that I also intend to create? Your father’s living trust has just one purpose: to allow his estate to avoid probate upon his death. If your father’s assets are owned by the trust, not by him, when he dies, then his estate won’t need to go through probate. Not all items are subject to probate, though: retirement accounts, life insurance policies and bank accounts with designated beneficiaries (that’s what a POD account is), go directly to the named beneficiary. Cars can be transferred via the DMV, and so don’t need to go through probate either. So, for your Dad, that leaves his house. You should transfer legal ownership of the house to his trust by filing a trust transfer deed with the county. When you record the deed, you’ll also need to file a Preliminary Change of Ownership Form (PCOR). This form tells the county assessor what kind of transfer just happened; the assessor wants to know if they can raise property taxes on that property, which they can’t, because a transfer to or from a living trust is NOT a change of ownership under Proposition 13. That pour-over Will is just a backup for your Dad. If he doesn’t transfer his house to the trust, and then dies, the Will says transfer whatever property he owned at death to this trust (that’s the pour-over part). But, if the value of that property is more than $150,000, you’ll need to go through probate to make the transfer. Put another way, the Will makes sure that all of your father’s assets get distributed as directed by the trust, but it won’t help his estate avoid probate first.
Dear Liza: My mom and dad set up a revocable living trust and now dad has passed away. Can my mom amend it? My answer is: Maybe. If your parents set up a trust that’s pretty common for married couples, in which the trust is divided into two trusts after the first spouse dies, your mother can’t amend the trust that holds your father’s assets. She can, however, amend the trust that holds her assets, which is revocable during her lifetime. This is called an A/B Trust. To find out if your parents have that kind of trust, find the section that says what happens after the first spouse dies. If it says to divide the assets into a ‘Bypass Trust” and a “Survivor’s Trust” or a “Credit Trust” and a “Marital Trust,” then your parents established an A/B trust. However, if that section says something like the assets are to be held in a revocable trust for the survivor’s benefit, then your mom can amend the entire trust (because it was never divided into two trusts).
Dear Liza: When putting property into a Living Trust does it trigger a tax reassessment under Prop 13? My parents purchased their property in 1968 and we didn’t want moving it into a Living Trust to trigger a reassessment. Nope. If your parents put their house into their own living trust, no reassessement is triggered. There are no ‘new’ owners, really. It’s just your parents owning the property under a different legal title. Putting property into a revocable trust for your own benefit is an exception to Prop. 13 reassessment. When your parents record the deed changing title to the trust, they will also need to file what’s called a Preliminary Change of Ownership Report (PCOR). This form tells the county assessor about the transaction. There are a whole list of checkboxes on the first page of the form, and one box is that the transfer is to or from a living trust. Once the assessor sees that, they know that they can’t reassess the property. Note: This is an issue for my California readers. Proposition 13 freezes property tax rates at a value that’s set when the property is purchased by a new owner. Needless to say, those with low property tax rates do NOT want to see that rate reassessed while they still own the property.
Dear Liza, is it necessary to have both a last will and testament if you have a living trust? Yes, that’s the way it is usually done. There are two main reasons for this. First, if you have minor children, the Will is where you nominate guardians for them. But also the Will provides an important way to make sure your trust is the one set of instructions for who gets what and how it’s managed.
Here’s why: your trust holds the property that you transfer into it during your lifetime. You do this by either recording a deed (for real property) that transfers ownership from you as an individual to you as Trustee, or, in the case of a brokerage or bank account, by filing out paperwork that states that the account is owned by you, as Trustee. (These are called Change of Title Forms at most institutions; sometimes Trust Account Applications or something similar.) However, most people don’t actually transfer all of their assets into such a trust. When they die, often there are everyday checking and savings accounts, cars, or other assets outside of that trust. Sometimes they have simply forgotten to transfer accounts that should have gone into the trust or refinanced a house and taken that house out of the trust in the process, then forgotten to put it back in. So, that’s where the Will comes in–it’s usually a special kind of Will, called a ‘pour-over Will’–and it says that all such property should be poured into the trust/transferred into the trust after a person’s died. That way all of a person’s property will be distributed via the trust. A note of caution: if too much property is held outside of the trust, you will need a probate proceeding before you can transfer ownership to the trust (the trigger amount varies from state to state). So, don’t rely on that Will to make things work–make sure that your major assets are held by the trust during your lifetime.
Hi Liza, I have a living trust and I’m the trustee in the trust. I have a will in the trust. I wanted to make some changes to the will and I’ve been told by my lawyer that I would have to
make another trust if I want to change the people in my will. If the will doesn’t have to go to probate why can’t I just make the changes in the will and have my designated
trustee distribute my estate after I’m dead? One of the people in my will has died, one is in a nursing home and two I haven’t heard from in years. This doesn’t make
any sense to me. Can you explain this to me? Well, truthfully, now I’m a tiny bit confused. It sounds like you have a trust, and in that trust you leave assets to various people. (I think that’s what having a “will in the trust” means.) Assuming that you are the Grantor of that trust (the person who established it) and it’s a revocable trust, you can certainly amend the trust to reflect your current intentions. It is common that we lose touch with people over the years, or change our minds about what we want to do with our assets over time. To make a small change to an existing document you would have your lawyer draft a trust amendment for you to sign, changing whatever sections of the existing trust needs revising. If you are making a lot of changes, you’d do what’s called a Restatement of Trust, which is like having an all-new trust with all current terms, but with the same name as the old trust, so you don’t need to retitle assets that are already in it. Maybe that’s what your lawyer meant by a “new trust.”