QUESTION: What is a ‘revocable’ Living Trust?
Answer: A ‘revocable living trust’ for a single person (including a typical “survivor’s trust” that is revocable by the surviving settlor as described in) will provide for distributions to the settlor during the settlor’s lifetime. When a single settlor holds the revocation power and is also entitled to receive all of the trust property on revocation, it is not terribly difficult to draft the revocable trust. In other words, the term ‘revocable’ is when you can basically terminate and end the Living Trust. The Living Trust can be prepared so that it is revocable and so that you are able to change it, alter it, terminate it or end it. It is very flexible.
Question: Are there any issues of concern with the revocable Living Trust?
Answer: Of course there are issues. When a joint trust is used for spouses or registered domestic partners, the issues and solutions may become more complicated—particularly if either settlor has substantial separate property. Clearly, the initial worksheet to list all property that you own and your spouse or domestic partner and the characterization and nature of the property. With a joint trust there is a substantial possibility that the day will come when both settlors are living but only one of them is competent. A settlor with substantial separate property and children from a prior marriage or partnership who becomes incompetent may be unwilling to allow the competent settlor to make unrestricted withdrawals of the incompetent settlor’s separate property—particularly when community property is available for the competent settlor’s support. Naturally, there should be provisions to explain and pursue this possibility.
Question: What about community property.
Answer: Similar issues can arise even with community property, but at least for community property withdrawn from a trust, the withdrawing settlor has fiduciary obligations to use the property for the benefit of the community. Community’ means you and your spouse. It should not be for separate property. Because the typical joint trust permits either settlor to revoke the trust with respect to community property, joint trust distribution provisions typically permit either settlor to withdraw community property.
Question: I assume having separate property also creates issues.
Answer: Yes, if there is substantial separate property, custom drafting may be needed for the separate property. For example, there are several issues that must be addressed:
It is permissible to use separate property for support when community property is available? Whether the separate property of a settlor is available to support himself or herself if the settlor becomes incompetent. If you chooses to use a revocable trust to transfer property, the trust will usually become the primary device for managing your property if you becomes incapacitated.
The bottom line is to make sure the drafting of the revocable Living Trust is done properly and with all the proper designations of the classifications of the property.
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Atty. Brian D. Lerner has been an Immigration Attorney for nearly a quarter of a century. He is married to a Filipina and has helped thousands of Filipino families all over the country. In addition to his offices in Southern California in Long Beach and Carson, he has an office in Quezon City. He is a certified specialist in Immigration and Nationality Law by the Legal Board of Specialization, California State Bar. The initial consultation is free. Call (562) 495-0554 and/or send an e-mail to [email protected].
