Sample Estate Plan

[For definitions of the legal terms used here, please visit our Glossary page]

(1) At the death of the first Spouse, all property remains in the Revocable Living Trust (RLT) for the use and benefit of the second Spouse;

(2) At the death of the second Spouse, the property is distributed in equal shares to each living child, or to the descendants of each child who shall have predeceased the second Spouse, by representation, so that descendants of the same degree take equally. If there are minor children, most people desire that the property be held in a "minor's trust," for the use and benefit of all the children but primarily the minor(s) until the youngest child reaches the age of eighteen (18). For young adult children, parents often desire to use a "capital growth trust," which holds the principal and distributes only income until the end of a terms of years. Another option would be to distribute one third (1/3) of the proceeds every five (5) years following the death of the second spouse. The methods of distribution and options available are almost unlimited; and

(3) If the second Spouse dies without surviving descendants, the estate might be given to a charity of your choice, or to a charity which then carries out activities of substantially the same character, or to extended family.

(4) In the absence of clear directions, the Trustee making distribution has the authority to hold property for minors or to distribute the property to someone for their benefit.

(5) If any beneficiary is receiving public support, the trust can be written so that distributions from the trust will not be used to reimburse the public agency paying the support.

Your estate plan based on an RLT should include additional supporting documents, such as a "Pour-Over" Will and a Power of Attorney for each Settlor , in order to create a comprehensive estate package.

1. The "Pour-Over" Will, included in your RLT package, is necessary to ensure that assets that are not placed in your RLT, such as automobiles, will be included in your estate at your death. It is nearly impossible to remember every asset when funding your RLT, and without a "Pour-Over" Will, forgotten assets will be subject to state intestate law, which controls descent of property when the owner doesn't have a will.

Moreover, certain things, such as appointment of a guardian for minor children, can only be done through a will. Also, certain assets are not amenable to transfer directly to an RLT, or should be left out to allow for the shorter statute of limitations, discussed here. In order to gain the best of both worlds, both probate avoidance and the shorter statute of limitations, you should consider transferring the bulk of your assets to the trust in a titling process called funding your trust , intentionally leaving a small asset or group of assets out of the trust, such as the family joint operating checking account, which typically has a small balance. This asset will be probated, shortening the statute of limitations for all creditors, but the strategy will avoid probate for the bulk of your assets, allowing your family to go about its affairs with the minimum of interference.

2. The Power of Attorney, also usually included, allows successor or co-Trustees to deal with your property as if it were theirs, and to assist you in your medical care. This allows your business and personal matters to proceed unhindered by your death, absence or, more commonly, your disability. This document is an important part of the device whereby asset guardianship is rendered unnecessary.

Since you, the Settlors, are also the Trustees, there is no need to file a separate Fiduciary Income Tax Return (Form 1041) or apply for a separate Employer ID number for the trust. In fact, the IRS will not allow you to get a separate tax identification number for your trust if you are alive and competent. You can file your regular 1040 form to report the income of your Trust for income tax purposes, just as if the income were your own. You use your Social Security number when any bank or other financial institution requests an Employer ID number for the trust. The trust is effectively "invisible."

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