Different variations on living trusts

VIDEO TRANSCRIPT:

Now let's talk a little bit about the living trust. One of the issues that I discuss with the clients is what are we going to do when the first spouse dies? So here we have a living trust at the top of the screen and then the first spouse dies. Now we have the living trust over here and the surviving spouse down at the bottom of the screen is scratching their head. They are in charge of everything in the trust in many cases, but one of the ultimate questions is will that person be subject to influences of others? In other words, if you leave that person with the keys to the kingdom and full control, can that person make changes to the trust? Can they change who the beneficiaries are? Can they use all the money? What are they allowed to do?

And this is one of the issues that I discuss with my clients. One of the solutions is to talk about what are we going to do- are we going to split the trust into two? And this is a very common thing that people do, if it's appropriate and if it's something they would like to have. So the first option is we have no split at all. Just like we had in the first screen where everything stays in one trust. But we also could do something called an "optional split", which is the second option here on the screen. An optional split is where the first spouse dies and the surviving spouse has the option to split the trust assets into two. On one side you're going to have the survivor's trust, which is the trust for the surviving spouse. And on the other side you're going to put some assets in something known as the "decedent's trust". So basically you're going to have an optional ability to put some money aside into something called the decedent's trust.

Now all of these trusts are addressed at the very beginning in the major trust document itself. So the person is not creating a completely separate document, they are just following the rules that established when I created the first living trust for the married couple. Now whether or not this decedent's trust is funded in our second scenario is optional. And there are a variety of reasons, tax and otherwise, that this might be a good idea for your family.

Finally, there is the mandatory split. Now again, these are three common things that I talk about with my clients. Your situation may be different, and may call for something more complex. However, for most families these are the three scenarios that I generally discuss with them. So the mandatory split is where the first spouse dies and the second spouse has to split the estate into two portions. One for the surviving spouse and one for the deceased spouse, where certain money is carved aside and put into this pot over here that will ultimately go to the children. The nice thing about the decedent's trust over here is that is an irrevocable trust- it cannot be changed. Which for some families offers them a sense of comfort.

The first and second options are very common. The mandatory split is very common when there is a major concern about how the surviving spouse would handle money. Also it's very common where there are children from previous relationships, and also when there is a certainly taxable estate- for sure it's quite certain that estate is going to be taxed. Which means that there's a lot of money at stake. Millions of dollars as I record this, and you may want to entertain this mandatory split in that particular situation.

So as you can see there are different varieties and different variations that we have to discuss. Call (661) 414-7100 and inquire about an appointment today.  Perhaps we can assist you with your estate planning questions.