Lesson remembered: A sure fire way to determine whether or not you've mastered something new about trusts & estates is seeing if you are able to teach someone else what you've learned. (As a teacher, I used to see if any of my math students were able to teach new math concepts to another student. If student B was able to grasp a concept taught to them by student A, I knew that student A had truly mastered the material.)
On Sunday, after a long conversation on the phone with "Estate Guy," I thought I knew what was going on. I really did. We were going back to a moment in time, the day that my mom died, to split an account in Living Trust into two new trusts. One was an irrevocable trust. The other was a marital trust. Both were for the benefit of my dad, who at that point in time, was still alive. I understood everything that "Estate Guy" explained to me. I was even able to repeat it back to him. Later last night, my brother called to ask me about my conversation to "Estate Guy." I was barely able to get much beyond, "Well, I filled out a whole bunch of forms and tomorrow I need to get two signatures notarized," when I realized I didn't fully understand what I was talking about. How could there be an irrevocable trust for the benefit of Dad? And what's a marital trust? Yesterday was the first day I'd heard about that!
Time for me to hit the internet since I couldn't seem to locate where this information is covered in the trust and estates book I'm currently reading.
Okay, so I think a marital trust was set up so that if my dad had needed any part of my mom's assets (half of the trust was hers) to survive once she had died, the marital trust could have provided income and assets, if he had needed them. My dad was the beneficiary of my mom's marital trust. I think.
I'm still trying to understand how my parents' revocable living trust became an irrevocable living trust for the benefit of my dad. Revocable trusts can be changed during the the lifetime of the grantors (the people who set up the trust). I guess that once Mom died, she had no way of revoking her trust. So at that point, the 50% of the trust attributable to my dad has to become irrevocable because they were grantors together. She was no longer around to make changes, and he was locked from being able to make any changes on his own.
I think a lot of this would make more sense to me if my dad were still alive. Then I'd be able to see what assets were considered (within the trust) my mom's and which were my dad's. But because he died so shortly after Mom died, it's all a moot point. Other than for tax purposes, it doesn't matter what type of trust the money goes into "for the benefit of" my dad. Eventually, the trust will get passed along to me and my brother. (And that's a whole other story. A new topic I'll need to read up about and try to make sense of.) But not yet. While I did these forms yesterday, they were just for one asset that my parents held during their lifetimes in their living family trust. Over the next few weeks, I'll go through the same process for many more assets within the living family trust.
I think I did learn a little something in an attempt to be able to explain to you all about marital trusts and how revocable family trusts become irrevocable family trusts (for the benefit of). Maybe I did learn something after all.
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