What is a “Pour-Over” will?
A
"pour-over" will is used to distribute any property that is acquired in
the name of the grantor after the living trust was established, or any
property that was not transferred into the trust in the first place. The
use of "pour-over," together with a living trust ensures that assets
not held in trust will be distributed in accordance with the wishes of
the deceased. A "pour-over" will, like any other will, must go through
probate if the decedent dies owning assets
Should I name my revocable living trust as beneficiary of my IRA?
If
you have created a revocable living trust, you can name the trust as
the beneficiary of your Individual Retirement Account. However, it may
make more sense to use the trust only as a secondary, or "back-up,"
beneficiary-especially if you are married.
In many cases, it is preferable to name a spouse or some other designated beneficiary as the primary beneficiary of your IRA. You can then name your Revocable Living Trust as the contingent, or secondary, beneficiary. By using this succession of beneficiaries for your IRA, your spouse will have the spousal elections that are available upon the death of the IRA owner. If the owner and spousal beneficiary are killed in a common accident, then the revocable living trust can serve as a receptacle for the IRA proceeds. In other words, naming your spouse or other beneficiary as heir to your IRA can provide the beneficiary with more flexibility in choosing how the account's assets will be used after you're are gone.
What are the primary differences between a revocable living trust and an irrevocable trust?
A
living trust is a written agreement established while you are alive.
You typically name yourself as the trustee of your trust, and another
person-typically a relative, friend, lawyer or bank trust department-as a
successor trustee to distribute the trust's assets if you die, or to
act on your behalf if you become incapacitated.
A revocable trust means the person who establishes it can change the terms of the trust at a later date if desired. An irrevocable trust, once established, cannot be changed. Setting up an `irrevocable' trust has tax advantages but they are rarely used since most people don't like to set up something they can't change later.
Do I need a living trust?
The big advantage to making a living trust is a monetary one, since property left through the trust doesn't have to detour through probate court before it reaches the people you want to inherit it. Probate, which may drag on for months, is the court-supervised process of paying your debts and distributing your property to the people who inherit it. By the time the inheritors get anything, a percentage of the property has been used for lawyer and court fees.
With a living trust, the person you appoint to handle the trust after your death – the successor trustee - simply transfers ownership to the beneficiaries you named in the trust. Much of the time, this can be accomplished in a few weeks. When all of the property has been transferred to the beneficiaries, the living trust ceases to exist.
There are other ways to transfer assets to inheritors free of probate within weeks or, at most, months of death, including making gifts before death, adding a pay-on-death designation to a bank account, holding your house in joint tenancy with right of survivorship with your spouse or partner, and naming a beneficiary for life insurance and retirement accounts. Other estate planning devices that avoid probate include joint tenancy, a life insurance policy, and in-trust-for bank account (also known as a Totten Trust), and individual retirement, pension or Keogh accounts.
But only the living trust can be used for all types of property and offers the broad planning flexibility of a will. With a living trust, for example, you can name alternate beneficiaries to inherit property if your primary beneficiary dies before you do. That's something you can't accomplish with joint tenancy or a pay-on-death bank account.
Does a living trust protect property from creditors?
Yes
and no. Since property in a living trust can be quickly and quietly
given to the beneficiaries, your creditors may not know what you owned
or find out about it until it’s already given out. Holding assets in a
revocable trust doesn't shelter them from a creditor who wins a lawsuit
against you, since he can go after the trust property just as if you
still owned it in your own name. It may not be worth the creditor's time
and effort to try to track down the property and demand that the new
owners use it to pay your debts.
On the other hand, probate can offer a kind of protection from creditors. During probate, known creditors must be notified of the death and given a chance to file claims. If they miss the deadline to file, they're out of luck forever.
What is a Power of Attorney?
A Power of Attorney is a legal instrument that is used to delegate legal authority to another. The person who signs a Power of Attorney is called the Principal. The Power of Attorney gives legal authority to another person (called an Agent or Attorney-in-Fact) to make property, financial and other legal decisions for the Principal. The word “attorney” here means anyone authorized to act on another’s behalf. It’s not restricted to lawyers.
A Principal can give an Agent broad legal authority, or very limited authority. The Power of Attorney is frequently used to help in the event of a Principal's illness or disability, or in legal transactions where the Principal cannot be present to sign necessary legal documents.
There are "Nondurable," "Durable," and "Springing" Power of Attorney.
A "Nondurable" Power of Attorney takes effect immediately. It remains in effect until the Principal revokes it, or until the Principal becomes mentally incompetent or dies. A "Nondurable" Power of Attorney is often used for a specific transaction, like the closing on the sale of residence, or the handling of the Principal's financial affairs while the Principal is traveling outside of the country.
A "Durable" Power of Attorney enables the Agent to act for the Principal even after the Principal is not mentally competent or physically able to make decisions. The "Durable" Power of Attorney may be used immediately, and is effective until it is revoked by the Principal, or until the Principal's death. If you don't specify that you want your power of attorney to be durable, it will automatically end if you later become incapacitated.
A "Springing" Power of Attorney becomes effective at a future time designated in advance by the Power of Attorney, such as the illness or disability of the Principal. You can specify that the durable power of attorney does not go into effect unless a doctor certifies that you have become incapacitated. A "Springing" Power of Attorney remains in effect until the Principal's death, or until revoked by a court.