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Revocable Trusts

By Terry Savage on November 17, 2020 | Financial Planning / Retirement

In 2005 my wife and I set up separate revocable trusts when the estate tax limits were much lower. Now that the limits are much higher and our assets would not be subject to estate taxes, would it be better to change our separate trusts into a “family trust” to avoid the administrative headaches that I assume would occur when one of us dies? For example, wouldn’t the surviving spouse have to obtain an EIN (Employee Identification Number) and do tax returns on the trust of the dead spouse? Thanks for your help Terry……I love reading your advice and listening to it on WGN.

Terry Says

You are very mistaken about how a Revocable Living Trust works — assuming that is what you each set up. If you are the successor trustee to her trust, and she is the successor trustee to yours, I’m assuming that you have separate properties and have renamed them into each of your revocable living trusts. And that you have named additional trustees of each of you cannot act as successor for the other.

When one of you dies, the successor takes over and follows the instructions in the trust about distributing property that is NAMED IN THE NAME OF THE TRUST. If you haven’t changed title to each of your properties into your respective trusts, this trust is worthless!

It will cost you some money to redo your estate plan – -legal fees — but all of this has absolutely nothing to do with estate taxes! I suggest you talk to an attorney who specializes in estate planning and get this sorted out now, while you can!

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