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Adding a beneficiary to a living trust.

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homemaker

Junior Member
We live in California and the living trust was created using legal software, not by a lawyer. The trust was created using California as state of domicile.

I have married for 10 years to my husband with a 2-yr-old and and another on the way. Back in August, 2006, we set up a living revocable trust with our then only child as the sole beneficiary with right of representation. We chose to have my mother as the first successor trustee with his father as the 'backup' trustee if my mother was either deceased or incapacitated or could otherwise not take on the responsibility. We further specified that the trust property be distributed to our daughter when she turned 25 or upon her marriage, whichever was sooner.

We are now expecting a second child, due to be born in Sept, 2007. The question I now have is - we'd naturally like to modify both our will and our living trust to include our second child. I know that the new will would naturally override the earlier but I am not so sure about how to make modifications to the living trust to allow our younger child to jointly inherit the assets with her older sister.

Also, would our daughters incur any estate tax when they each turn 25 or upon their marriage and become eligible to claim their respective inheritances? At this point of time, our biggest assets are a $550,000 home and life insurance death payouts - it's a $500,000 for me and another $500,000 for him, so the trust would have a total of $1,550,000 should we both die before they turn 25.

Any advice would be gratefully accepted. Also, we created the living trust document using legal software, so it's not as if we have an attorney to help us with questions

Thank you.
 
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tecate

Member
1. Make a first amendment to the trust. FYI, Anna Nicole did the same thing you did in her will, naming only her son, so look into generic language for your descendants to avoid the problems that many have commented on already.

2. How much estate tax would be payable depends on Congress in the next few years and the terms of your trust. Since you are doing this DIY, how much information have you read about how the estate tax works and how planning with trusts can lower your exposure?

(With an estate this large, I suggest buying an hour of someone qualified to look at what you have drafted.)
 

homemaker

Junior Member
Thank you for responding, tecate.

I am thinking of seeing a lawyer myself, after our second child is born. I am not sure that it is possible to create an amendment involving an unborn child?

Regarding, estate taxes, someone mentioned the AB trusts, but we're worried that creating such a trust would mean that our assets are permanently tied up with the trust - we can't sell our house and move if, for instance, he is transferred. Again, maybe a lawyer could help, but since it will be a while before we get to see one, I thought I'd post here and see what feedback the members could give me.

Do you have any ideas / suggestions / feedback?

Thank you.
 
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moburkes

Senior Member
You need to see a lawyer before the 2nd child is born. You could die and the baby survive. Also, you're making the TRUST the BENEFICIARY of the life insurance policies? Did you REALLY mean to say that? You need a tax attorney now, if that's the case.
 

tecate

Member
Why don't you feel it is possible to create an amendment involving an unborn child?

If all you plan on doing now is acting on what others "mention" I believe you are making a big mistake. This is a complicated area: much too complicated for simple tips. Living trusts aren't all the same. If you want to do this DIY, do some basic research yourself on typical estate planning for California couples and you will see. Use google, buy a book or look at books in your local law library.

moburkes, if OP and spouse continue to "own" the policies, why wouldn't you make the trust the owner and beneficiary? Formal probates and guardianships are a royal pain.
 

homemaker

Junior Member
You need to see a lawyer before the 2nd child is born. You could die and the baby survive. Also, you're making the TRUST the BENEFICIARY of the life insurance policies? Did you REALLY mean to say that? You need a tax attorney now, if that's the case.
Even if I died, my husband would still be around - and he still calls the shots as the surviving settlor / grantor and he has the right to change the terms of the trust to make provisions for our younger daughter.

Also, I don't see the issue in making the TRUST the beneficiary. What tax issues could I possibly have? When I researched this issue, I read that there won't be a big tax bill IF your beneficiary is a spouse. If not, and your children inherit, than Uncle Sam gets to be a bigger beneficiary than them! That was the point of making the trust the beneficiary - to make sure Uncle Sam does not get a huge part of the pie.
 
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Zigner

Senior Member, Non-Attorney
I don't see the issue in making the TRUST the beneficiary. What tax issues could I possibly have? When I researched this issue, I read that there won't be a big tax bill IF your beneficiary is a spouse. If not, and your children inherit, than Uncle Sam gets to be a bigger beneficiary than them! That was the point of making the trust the beneficiary - to make sure Uncle Sam does not get a huge part of the pie.
If Baby(s) are the beneficiary of the insurance policy, then there is NO tax. If the trust is the beneficiary, then there may be tax.
 

homemaker

Junior Member
Why don't you feel it is possible to create an amendment involving an unborn child?

If all you plan on doing now is acting on what others "mention" I believe you are making a big mistake. This is a complicated area: much too complicated for simple tips. Living trusts aren't all the same. If you want to do this DIY, do some basic research yourself on typical estate planning for California couples and you will see. Use google, buy a book or look at books in your local law library.

moburkes, if OP and spouse continue to "own" the policies, why wouldn't you make the trust the owner and beneficiary? Formal probates and guardianships are a royal pain.
Again, I have NO intention of doing this by myself, which was the reason I posted here in the interim period. I have every intention of seeing a lawyer, I just did not know if seeing one before my younger daughter is born was a good idea. I reasoned that even if I died in childbirth - as the other poster suggested as a possibility - my husband, as settlor / grantor of said trust, would still be around to add an amendment to the trust to make provisions for our younger child.

But I absolutely am seeing a lawyer. However, given your feedback, my first job tomorrow would be to get in touch with an attorney and see if s/he will help us out, given that one of our children is unborn. We realize that we need an attorney to plan our estate, so the terms and inheritances are fair to BOTH girls and that Uncle Sam does not get more than they do!
 
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