Trust Primer
AB Living Trust Revocable / Irrevocable
What you've always wanted to know about trusts !
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Trust Primer   
( What you've always wanted to know about trusts ! )
 
 
A trust is merely a private written agreement between the grantor(s) and the trustee(s),
about what to do with any assets that are conveyed to the trust (both now and later, by anyone),
for the benefit of the beneficiaries of the trust.
 
A trust can be either revocable or irrevocable.
The similarities and differences between these 2 kinds of trusts are summarized in the table below.
 
You can scroll down as you read through the table below, or click on one of the following subjects:
 
State    Trust Name    dated    Page 2    Grantor(s)    Trustee(s)    Beneficiaries
Amendments    Resolutions    Unclear Provisions    Irrevocable    Will    Bank Account    Signing
Tax ID#    Taxes    Tax Returns    Cash Basis    Appreciation    Estate Taxes    Probate
Disclaimer    Inputs
 
( If you click on a subject above, the "Back" button at the top left of your screen, will return you to here. )
 
 
AB Living Trust, Revocable Trust, Irrevocable
State domiciled in:  A trust is NOT a state (or any other governmental division) licensed entity such as a corporation.  A trust is merely a common law agreement (a contract) between the grantor(s) and the trustee(s) (see TRUST INDENTURE).

In Part 18 you fill in the state that you initially want to be "domiciled in, and subject to the laws of" (see Part 18 A.  Governing Law).  However, remember that the goal is to be able to move your trust from state to state, and even from country to country, so do not add anything that would limit the trust's mobility.
(For example, you want to avoid having a reference in your trust that incorporates the laws of a particular state into your trust.)

Wherever it moves to, it may have to deal with local laws.  But, the Trust Agreement is still a contract between the grantor(s) and the trustee(s), which involves no municipalities.  (See NAME AND DOMICILE and Part 18 A.  Governing Law.)
Trust Name:  The best name for a trust takes the form of Word1 Word2 Trust, or maybe just letters of the alphabet such as ABC Trust.  Since a trust is private, the name of the trust should not normally reveal anything significant about the grantor(s), trustee(s), or beneficiaries, or the goals of the trust (see Part 1.  Trust Name).

( Therefore, names like "John Doe and Jane Doe AB Living Trust" should be avoided. )

An exception might be:  an irrevocable trust that is going to engage in a certain kind of business.  However, even this case can be handled with a DBA (doing business as) "name" for business purposes, while keeping the trust name non descriptive.
Trust Name dated mm/dd/yy:  The date that the last grantor or trustee signs this trust (normally, everyone signs & notarizes 2 originals on the same date), becomes the date that the trust is "dated" (sometimes abbreviated "dtd").  This creation date is written in the trust on the last page before the signatures (see after Part 23.  IN WITNESS WHEREOF).  This date, when added to the trust name, makes "Trust Name dated mm/dd/yy" unique (assuming this is the only trust with this name created on this date).
Page 2:  DECLARATION OF TRUST:  Only fill in the trust name dated: mm/dd/yy line on this page (see name of:).  Leave the rest of the lines blank, on this page.  Then, sometime in the future, a trustee can make a photo copy of this page, and fill in the then current "state of", "trust Address:" and "Trustee names" information.  This page is a single page summary of the trust, written for others (having a need to know), disclosing all they need to know, about this trust.  Unfortunately, today, it is best to ignore this page, and provide others with the pages described below under "Opening a Trust Bank Account."
AB Living Trust, Revocable Trust, Irrevocable
Grantor(s):  Typically, the husband and wife Grantor(s):  Typically, an unrelated good friend.
Trustee(s):  Typically, the husband and wife,
and thereafter, their children/child beneficiaries		 Trustee(s):  Typically, the husband and wife,
and thereafter, their children/child beneficiaries
Beneficiaries:  Typically, the husband and wife, as life beneficiaries of the trust (for their lifetimes),
and their children (or in the case of multiple trusts, maybe only one child on each trust)
AB Living Trust, Revocable Trust, Irrevocable
Amendments:  The trust may be amended or revoked (terminated) at any time (prior to death). Amendments:  The trust may not be amended, but may be dissolved by distributing the assets to the beneficiaries.

However, if changes in the law (or tax laws) threaten the trust, the trustees can amend the trust to adapt to these changes (see Part 18 F.  Conflicts with Laws).
Resolutions:  Many times, only a resolution is required, rather than an amendment.

The trustee(s) may pass resolutions covering contingencies as they arise.  In construing the provisions of this Declaration of Trust and any supplemental amendments or resolutions, the presumption shall be in favor of the grant of powers to the trustees  (see DECLARATION OF AUTHORITY at the beginning of the trust).

Likewise, by their resolutions, the trustees may set forth their own general powers and authority as conferred upon them in this DoT (see Part 9 B.  Any act legal for an individual).
Unclear or Disputed Provisions:  Trustee can unanimously construe;
If any provision of this DoT shall be unclear or the subject of dispute among the parties to any trust, the trustee shall be fully authorized to unanimously construe such provision, and any such unanimous determination by the trustee shall be final and binding upon all such parties  (see Part 9 K.  Trustee can unanimously construe).
AB Living Trust, Revocable Trust, Irrevocable
AB Living Trust:  This kind of Living Trust becomes an irrevocable Trust A (the Bypass Trust) upon the death of the first spouse, and automatically creates another revocable living trust (Trust B) for the surviving spouse. Irrevocable Trust:  Since this kind of trust is already irrevocable, its status is not affected by the death of either spouse.
Will:  A "Pour Over" Will is needed that will "pour" any assets or personal items not previously conveyed to a trust, "over" into a trust.
Opening a Trust Bank Account (if you find it necessary to):  Normally, to open a new account in the name of the trust, all the bank needs to see is a photo copy of the top part of page 3 (Part 1.  Trust Name) showing the trust's name, and page 29 showing the Grantor(s) signatures, and page 30 showing the Trustee(s) signatures.  This is all the IRS requires of the bank.  Sometimes, they will want to keep these 3 photo copies in the bank's files.  (Also, you will need a Tax ID# (see Tax ID# below).)

But, if a bank wants more than this (to play trust attorney, or to give their trust department something to do), it's best to find another bank that respects the privacy of a trust.
Signing as a Trustee:  Be sure to always include the name of the trust, and always sign your name as "Name, Trustee", because you are signing on behalf of the trust, not on behalf of yourself as an individual.
( You are not signing individually. )
AB Living Trust, Revocable Trust, Irrevocable
Tax ID#:  The trust uses the husband's and/or wife's Social Security number(s). Tax ID#:  The trust gets its own tax identification number from the IRS.
Taxes on annual cash profits:  Trust income, deductions, etc., are normally just included in the husband and wife's personal tax return. Taxes on annual cash profits:  The trust can keep part of the profits by paying the taxes on what it keeps,
and can distribute the rest of the profits to the beneficiaries (via K-1 forms) which the beneficiaries then add  to their personal tax returns, to pay the taxes.
Tax Returns:  Normally, no separate tax return.  Just include amounts in the husband and wife's personal tax return.  The IRS's Form 1041 instructions say:

" A revocable living trust is an arrangement created by a written agreement or declaration during the life of an individual and can be changed or ended at any time during the individual’s life. A revocable living trust is generally created to manage and distribute property. Many people use this type of trust instead of (or in addition to) a will.  Because this type of trust is revocable, it is treated as a grantor type trust for tax purposes.  See Grantor "

" In general, a grantor trust is ignored for tax purposes and all of the income, deductions, etc., are treated as belonging directly to the grantor. "

 Tax Returns:  The IRS's Form 1041 instructions state that the trust must file Form 1041 if it has:    
" 1.  Any taxable income for the tax year,
2.  Gross income of $600 or more (regardless of taxable income), or
3.  A beneficiary who is a nonresident alien. "

Therefore, if none of the above occur during a year,
no Form 1041 is required to be filed.

( This is good news for assets that can just sit in a trust and appreciate, with no tax returns due (if on a cash basis), until the assets are sold. )
AB Living Trust, Revocable Trust, Irrevocable
 
 Keep Trust on a positive Cash Basis:  Normally, a trust should only incur cash expenses (such as reimbursing others who covered trust expenses (currently, or in the past), when the trust has cash income to pay such expenses.
( A trust can only apply carried forward losses to current income when it dissolves. )
Appreciation:  Appreciation of trust assets occurs in the husband and wife's estate. Appreciation:  Appreciation of trust assets occurs in the trust (i.e. not in any person's estate, that is, not until assets are distributed to beneficiaries).
Estate Taxes:  Trust assets are split between husband's and wife's estate (i.e., not all in one's, and then all in the other's) Estate Taxes:  Trust assets are not part of any person's estate.
Probate:  A trust avoids probate
(formalities, time delays, court and attorney costs,
and public exposure normally associated with probating a will)
AB Living Trust, Revocable Trust, Irrevocable
 
 
 
 Disclaimer
 
This Trust should work (no guarantees) in all states (except Louisiana, where the estate planning documents created by most software won't be legal due to that state's specific drafting requirements).
 
Please note that this website is not a law firm, does not act as your attorney, and is not a substitute for the advice of an attorney.  Rather, it helps you represent yourself in your own legal matters, by providing samples of forms and documents others have used.  Use any forms and documents such as these at your own risk.  No one assumes any liability for damages, or consequential damages.
 
Read this trust through to make sure you are comfortable with what it says, and the approaches it takes.
 
If you seek representation, are involved in litigation or have complex legal issues that cannot be resolved on your own, you may want to consider other alternatives, including consulting an attorney.  Only you can tell whether or not a form or document is right for you, given your circumstances.  If you want advice geared to your specific situation, consult an expert.  No general legal form or document is a substitute for personalized advice from a knowledgeable lawyer licensed to practice law in your state.
 
This website contains the ideas and opinions of the author.  This website does not contain specific investment, legal, tax or any other form of professional advice.  If specific advice is needed, it should be sought from an appropriate professional.  Any liability, responsibility or warranty for the results of the application of principles contained in the website, insights, hints, sample forms and documents, either directly or indirectly, are expressly disclaimed by the author.
 
 
 
Inputs:  If you find phrases, and/or paragraphs that you feel better describe or illustrate certain trust details,
or should be included in this trust agreement, please forward them to:  trust-inputs@AbesAlerts.com
 
 
AbesAlerts.com
 
This Page Updated  Mar. 10, 2008
 
 
Trust Primer
AB Living Trust Revocable / Irrevocable
What you've always wanted to know about trusts !
Local Home   AbesAlerts.com on the web   Trust Primer  Universal Trust Agreement Filled-in Samples (.doc & .htm)
 .htm Sample