The first document of your trust package is the
THE TRUST CONTRACT

The trust contract is the workhorse of your trust. Your financial custodians (banks, stockbrokers, etc.) will not transfer the assets you currently hold in private ownership to trust ownership until the trust contract is executed and your signature(s) on the contract have been notarized.

Sometimes referred to as a "Declaration of Trust," the trust contract is the written agreement that you as the grantor(s) of your trust make with that person(s) you have chosen as the trustee (manager) of your trust. Because the trust grantor(s) almost always names himself/herself/themselves as the trustee(s), the trust contract is nothing more than a written agreement that you make with yourself! You will sign it twice; once as the grantor of the trust and again as the trustee of the trust.

Your financial custodians (bank, stockbroker, credit union, etc.) need to know with whom they are doing business, who signs the checks, and to whom the funds are returned when they are asked to return them. Thus, the existence of a trust contract must be established to prove to your financial custodians that you have named a trustee(s) and successor trustee(s) for your trust. Without such proof, your financial custodians cannot transfer your assets to the trust. Thus, your financial custodians will want to see those pages of your trust contract where you have named a trustee and a successor trustee. They also need to see the final page of the trust contract to make sure you have signed it. They are not entitled to see any other information in the Trust Contract.

SUCCESSOR TRUSTEES:

In addition to appointing yourself and, if married, your spouse as the primary trustees of the trust, the trust contract also appoints the successor trustee(s) whose job it is to take over the management of the trust when the primary trustees (you and your spouse) are both incapacitated or dead.

The successor trustee(s) can be any trustworthy person over the age of 18 such as one or more of your adult children, some other close relative, or a devoted friend. Corporate Trustees (banks, trust companies, etc.) should be appointed only as a last resort. To learn about some of the shortcomings of appointing corporate trustees, click here and then scroll to Question #11.

Because in most situations you (and your spouse) will be the primary trustees of the trust, your first decision in organizing your trust will be to select your successor trustee(s). You can elect to name one person as a sole successor trustee with one or more persons as alternatives in the happenstance that your original choice is unable to serve, or you can name several persons (perhaps two or more of your adult children) to serve as co-successor trustees. Co-successor trustees each have equal authority and power, and together would act as a team.

In making such choices, it is a time for hard-nosed thinking and not sentimentality. You are not planning your funeral where you might want each child to play an equal part; you are devising the financial future of your family. Take into consideration both ability and geography. A capable child living on the same city or town in which you live is usually a better choice for successor trustee than a capable child that lives a thousand miles away.

Optioning for co-successor trustees is very popular today, but it can end up causing all kinds of trouble. Do not select all of your children as co-successor trustees simply because you want to spare the feelings of those less competent. Children should be selected as co-successor trustees only because they respect and work well with their siblings.

The greatest ability that a successor trustee can possess is being able to take the bull by the horns without being influenced by quarreling beneficiaries. The successor trustee(s) will be in full charge at your death to do as the conditions of the trust contract command him/her to do. If one child stands head-and-shoulders over the others, forget the co-successor trustee idea and select that qualified child as sole successor trustee, using one or two of the others as backups in the order of their abilities.

Regardless of which choice you make (sole successor trustee or co-successor trustees), remember that your chosen successor trustee(s) cannot change any of the conditions that you have set down in the trust contract. By law, the successor trustee(s) must carry out your exact wishes as you set them down in the trust contract just as he/she/they promised to do. Anything else can win the successor trustee(s) a few years in jail for breach of contract.

Choose below if you want a sole successor trustee, co-successor trustees, or if you (and your spouse) have chosen to select someone other than yourself(s) to be the primary trustee(s) of the trust.

Select below those persons (and their addresses) that you have chosen as your successor trustees. In the case you have chosen to use a sole successor trustee, make sure to list your primary choice and any backup choices in the order you would want them to serve. In the case of death, sickness or the just plain refusal of your original choice as successor trustee it is important that there be at least one alternate to your original choice.

As the grantor(s) of your trust, you will make most trust decisions and settlement decisions while you are alive, which leaves the successor trustees with nothing to do other than to carry out the instructions in the trust contract. However, it is possible for a minor decision to arise after your death(s). If you have chosen co-successor trustees you must indicate below how you would want such decisions made.

TRUST NAME:

The trust contract also gives the trust a name. Most trust names are relatively simple and short, however you can choose whatever you want so long as it ends with the word "Trust." A few examples would be:

The Smith Trust  -  The Smith Family Trust   
The John & Mary Smith Trust  -  The J & M Trust
The Smith Loving Trust  -  The Smiths of Maple Ave. Trust

Choose a name for your trust below:

COMMON TRUST or A-B TRUST (married couples only):

If you are married, you have a choice of adding an option to your trust that will convert it from a Common Living Trust to an A-B Living Trust at the death of the first spouse to die.

A Common Living Trust sacrifices one of your two estate tax exemptions but allows the surviving spouse to use all of assets in the trust free of any restriction.

An A-B Living Trust places some minor restrictions on the use by the surviving spouse of the deceased spouse's assets but in effect doubles the amount of the Federal Estate Tax exemption. This allows the estate to completely avoid or greatly reduce estate taxes. To learn more about Common Trusts and A-B Trusts, click on Lesson 5 of the Layman's Guide to Living Trusts.

If you are married, select below whether you want a Common Living Trust or an A-B Living Trust. (single persons and married couples where one spouse is not an American citizen are not eligible for an A-B Living Trust).

TRUSTEE RESPONSIBILITIES AND ASSET DISTRIBUTION:

In general, your trust contract 1) describes the duties of the trustee while you are alive and 2) describes the duties of the successor trustee after your death and, if you are married, after the death of your spouse. It also makes provision for the successor trustee's intervention into the management of the trust in the circumstance that you and your spouse become physically or mentally incompetent.

A section known as the Schedule of Trust Beneficiaries in the trust contract gives the successor trustee(s) specific instructions as to how you want the assets to be distributed to the beneficiaries (heirs) after the deaths of you and your spouse.

Very important:

There are two different methods for distributing assets to beneficiaries upon the deaths of the trust grantors - and you can use either separately or a combination of both. The first method (usually referred to as Whole, Undivided Assets) leaves complete and separate assets to the beneficiaries. Such an asset could be a house or other real estate, a block of stock, a business, a fixed amount of cash to an individual, club, association, charity, etc.

NOTE: It is best that you do not include personal and household possessions, heirlooms, jewelry, autos, gun collections, etc. with your whole, undivided assets. Such personal possessions are best left to your beneficiaries in an auxiliary document called the Personal Property Distribution Memorandum provided in your trust package, which will be explained later.

The second method has great popularity in medium and smaller-sized estates. It is called Shares. Instead of leaving different assets to each of your beneficiaries, you simply leave all or a portion of your estate in equal shares to each of your beneficiaries, allowing them to work out the finer details.

There are many scenarios where you may want to use a combination of both methods. As an example: You want each of your children to receive an equal share of everything you own. However, one of your children has special needs and you would like to leave your home to that specific child. To do so, you would leave the home to the child of special needs as a whole, undivided asset and the balance of the estate to your children in equal shares.

If you are married and want to leave specific whole, undivided assets to your beneficiaries you can select one or all of three distinct avenues of distribution; 1) after the death of the husband, 2) after the death of the wife or 3) after the death of both spouses. Below, list a brief description of any whole, undivided assets you wish to leave after death, the beneficiary who will receive it, and their relationship to you or, if not related, their address. For your convenience, see examples for filling in lines #32, #33 and #34 that follow  (It is important to understand that if you wish to leave your entire estate to your beneficiaries in equal shares, do not use lines #32, #33 and #34 and instead skip ahead to lines #35 through #50). 

Examples
Residence, 3281 Maple, Dade City, FL to Glen Stockdale, son
Cottage, Lake Tarpon, Palm Harbor, FL to Margo Cox, daughter
$10,000 to First Methodist Church, Dunedin, FL

32. The following whole, undivided assets to be distributed after death of husband:

SHARES:

If you wish to leave all of your estate immediately to some or all of your beneficiaries in equal shares, or the balance of your estate in equal shares after consideration of the distribution of various whole, undivided assets in the schedule above, you should complete the schedule below. In each case the schedule calls for an alternate beneficiary should your original choice of beneficiary die before you do. You have three choices. Write one of the following three descriptions in the Alternate Beneficiary blank:

(1) Or to his/her living children in equal shares
(2) Or to his/her surviving beneficiaries of this trust in equal shares
(3) Or to John Jones, 12345 Sample St., Anywhere, AZ

There are spaces provided for eight equal-share beneficiaries. If you require more, submit them in a separate e-mail.

NOTE: Even though it is your wish to leave all of your estate in whole, undivided assets, there may be "surprise assets" that turn up at your death which you forgot about or were created at your death. Without any instructions in your trust contract, a judge would be required to determine whom such assets were to go. Consequently, it is wise to set up a schedule of Shares to guard against such a possibility even though it is your original intent to leave all of your estate in whole, undivided assets.

DELAYING DISTRIBUTION OF ASSETS:

A Living Trust allows you to delay the distribution of an inheritance until 1) an under-age beneficiary reaches legal age, 2) an immature beneficiary already of legal age reaches a more mature age, or 3) to a beneficiary that is receiving SSI or other benefit from the government.

Distribution of inheritance principal directly to a beneficiary that is receiving some kind of government assistance could trigger the confiscation of the inheritance to reimburse the government for benefits already paid or the discontinuing of the benefit. Such a child should receive funds only for expenses or for dividends, interest and other income earned by his/her share of the estate.

If any of your beneficiaries fall into one of these three categories you will want to set up a schedule in the trust contract that will delay or deny principal being paid to such beneficiaries. In the circumstance of a child receiving SSI or some other government benefit, set the age of distribution high enough that the child cannot possibly outlive it.

An example of a delayed distribution schedule is shown below:

Name of delayed beneficiary #1: Frank Curtis
Percentage to be paid, and age of beneficiary at time of 1st  payment: 25% at age 21
Percentage to be paid, and age of beneficiary at time of 2nd payment: 35% at age 25
Percentage to be paid, and age of beneficiary at time of 3rd payment: 40% at age 30

The schedule below can be used to indicate how you would want the payment of various shares to be delayed.  If you want the inheritances to all beneficiaries paid as soon as possible, skip blanks #51 through #54 and move ahead to Deductions of Loans and Advances:

DEDUCTION OF LOANS AND ADVANCES:

The trust contract can permit the successor trustee to deduct any loans or advances made by the you the trust to a beneficiary that remain outstanding at your death(s). It assures that each beneficiary will receive his/her fair share of the estate.

Should you have such beneficiaries, list such beneficiaries below along with the amount owed and a date on which the loan was reconciled. Don't guess at the amount. A mistake on your part could lead to a nasty situation later where the beneficiary might legally contest your integrity. Be sure to present the borrower with a receipt each time he/she makes a payment on the advance and keep an accurate record of the payments made.

DISAPPEARANCE:

Each state says that should a person disappear and their body cannot be found, a period of seven years must elapse before a death certificate can be issued.

The successor trustee(s) of a Living Trust requires the death certificate of the primary trustee to enable the successor trustee(s) to take over the trusteeship of the trust. Otherwise, the distribution of assets could be delayed by as much as seven years.

This law can be circumvented by a trust contract that permits the successor trustee(s) to distribute assets according to the terms of the trust contract upon the disappearance of the primary trustee(s) even though it cannot be proved that the primary trustee is dead.

To set up this clause in your trust contract, simply indicate below the number of months delay you would want upon your disappearance before the successor trustee could step in and distribute the assets. A minimum of at least 12 months is recommended but you are free to choose any period of time you wish.

Your Living Trust renders your present Last Will and Testament worthless. Regardless of what your present will says, once your assets have been transferred to a trust you personally no longer own anything to will. The assets are owned by your trust and your trust does not die.You can tear your present will up, throw it in the river (check the local littering laws first!) or line the bird cage with it. If your attorney has your will or it is filed with Probate Court there is no need to retrieve it. Let them line their bird cage with it.

However, should you forget to transfer one or more of your assets into the trust, or an asset is created at the time of your death (such as an insurance settlement in a wrongful death lawsuit), such an asset(s) would be exposed to an expensive "intestate" probate procedure. The distribution of any such assets caught in an intestate probate procedure would be controlled by iron-clad state laws. The decedent's verbally expressed wishes while alive would have absolutely no merit in court.

A Pour Over Will rectifies this rare situation. The Pour Over Will is a supplementary, emergency document that leaves any such forgotten or johnny-come-lately asset directly to your trust.

In almost every case, the successor trustee, upon taking over the management of the trust, finds that all assets have been properly transferred to the trust and that no assets have been created at death. The successor trustee(s) then discards the Pour Over Will(s) as a useless and unneeded document. It is there only should an emergency arise.

The Pour Over Will is also the proper document in which to name guardians for any underage children you might have.

It is important to understand that the surviving spouse (as grantor and co-trustee) always has the power within the trust contract to transfer assets to the trust after the death of the first spouse to die and does not require a Pour Over Will to make such a transfer. Thus, the Pour Over Wills of both spouses almost always name a successor trustee as the personal representative, giving him/her to power to avert an intestate probate situation.

For the sake of convenience, expediency and coordinating the settlement of the estate at death, it is recommended that you name the first two successor trustees named in the trust contract as the personal representative and alternate personal representative of your pour over will(s). However, you are free to name any persons you wish. List your choices in the spaces provided below.

It is next to impossible for anyone to contest the terms of a Living Trust contract. However, assets outside of the trust and represented by the Pour Over Will are fair game for any disgruntled heir. One of the more frequently used arguments of a disgruntled heir making such a challenge is to claim that he/she was inadvertently forgotten. Believe it or not, many a sympathetic probate judge has succumbed to this invention. To nip such a thesis in the bud, people find ways to mention the name of all possible heirs in the will.

Consequently, your Pour Over Will leaves each legal child and grandchild one dollar of any assets found outside of the trust. No disinherited child can then make the claim of being inadvertently forgotten. The balance of the assets (less $1 to each potential heir) outside of the trust then flow into the trust through the terms of the Pour Over Will and are distributed to your legitimate heirs from the trust. 

In the space below, indicate if you have children that you wish to disinherit

Also in the circumstance that you have either underage children requiring a personal guardian or yoiu have children you want to disinherit, list the names of all of your children below:

Names of a husband's  or single person's
legal children

In the event that you and your spouse become temporarily or permanently incapacitated, the trust contract gives your successor trustee the power to step in and manage the assets and affairs of your trust (something a will could never do). The trust contract, however, does not give the successor trustee power to manage any asset that you might hold outside of your trust.

The trust package includes a Financial Power of Attorney that rectifies this situation. It conveys to the successor trustee the single power to transfer into the trust any asset the successor trustee finds outside of the trust.

Once the asset has been transferred to the trust, the successor trustee can then manage that asset through his/her power in the trust contract. Legally, a person given such power in a power of attorney document is referred to as the agent.

Because a healthy and competent spouse already has the power as co-grantor of the trust to transfer forgotten assets to the trust in such a circumstance, it makes little sense to give either spouse such agency.

For the sake of coordination and expediency, the National Center of the Avoidance of Probate recommends that you give this power to your first two choices for successor trustee as agent and alternate agent respectively. However, you can choose anyone you wish. Use the two spaces below to make you choice.

A health care power of attorney is not automatically a part of a Living Trust. Many folks have a health care power of attorney but do not have a Living Trust and visa versa.

Health care power of attorney documents are now available at most doctor's offices without charge. They are written by the state in which you live and are always up-to-date in regard to the laws of your state.

Nonetheless, for your convenience the National Center for the Avoidance of Probate includes a health care power of attorney for each spouse in the trust package.

The Health care power of attorney furnished with your trust package automatically gives your first two choices of successor trustee the power to make health care decisions for you should you be physically or mentally incapable of making such a decision for yourself. This can include the power to make life-sustaining decisions if you so choose.

The person to whom this power is conveyed is called the Patient Advocate. An alternate patient advocate is also appointed should your first choice be unavailable at such a time.

To make such decisions, the patient advocate must have the signatures of your attending physician and another doctor on an accompanying statement within the document furnished that in their unanimous opinion you have reached a condition where you are mentally or physically unable to make such decisions for yourself.

The document lists standard conditions on which you would want certain types of treatment, or "the plug pulled". However, a blank space in the Health Care power of Attorney allows you to write in special conditions that would allow your patient advocate to act.

Because it is generally conceded that a competent wife/husband already has the marital power to make such decisions for her/his ill spouse, naming the spouse as patient advocate is usually a waste of the document.

If the automatic naming of your first two choices of successor trustee as patient advocate and alternate patient advocate respectively does not meet with your approval, indicate your choices below:

Special Note: Many folks allow emotion to become involved in such a choice and consequently appoint two or more adult children as co-patient advocates. This can be a mistake.

Give careful thought to what your physical and mental condition may be at such a time. If you are faced with a terminal illness, pain, or the need of immediate emergency surgery would you really want co-patient advocates in the hall outside your hospital room arguing, bartering and voting to determine the extent of your suffering? At a time when minutes might count, one of the co-patient advocates could be out of town or unreachable, completely hamstringing the doctor or hospital. Your very best bet is almost always one person of character, trust, strength and understanding to decide your fate.

Have questions concerning this document? Click here or...
speak directly to Gordon Mead Bennett at 800-338-0227 toll free

The following are Auxiliary Forms that may or may not be used with your trust package, depending on the circumstances of your estate

The first Auxiliary Form of your trust package is
The Bill of Sale

Lesson 2 of the Layman's Guide to Living Trusts explains the fact that when a list is left behind describing who gets what, or when the heirs can reach a private and amicable agreement between them, assets in your possession (personal property) can avoid probate and will not require transfer to the trust. Some folks feel more comfortable, however, when all of the assets, including personal possessions, are owned by the trust. This is accomplished with a Bill of Sale with which you sell all personal property in your physical possession to the trust.

The Bill of Sale furnished with your Living Trust package requires three things,  1) the addresses where you keep personal possessions, 2) a list of personal assets that might be on loan to friends, relatives, schools, churches, etc., and 3) your signature(s). Fill in such information below:

Have questions concerning this auxiliary document? Click here or...
speak directly to Gordon Mead Bennett at 800-338-0227 toll free

The next Auxiliary Form of your trust package is
THE PERSONAL PROPERTY
DISTRIBUTION MEMORANDUM

Also explained in Lesson 2 of the Layman's Guide to Living Trusts are the personal property raids that often take place after both parents die. If you have special personal property items that you wish to go to specific people (diamond rings, autos, grandma's silverware, garden tractor, gun collections, etc.) such bequests are best handled in this memo and then attached to the last page of the trust contract. Instructions as to how to attach the memo are included with your trust package.