Simplified v Full Revocable Living Trust
Posted on Wed, Feb 02, 2011
We’ve been asked . . .
Q: “Today, I tried to assemble a Revocable Living Trust that included a residuary distribution to a charitable remainder trust, but the option to make a distribution to charity did not appear in any of the input screens. Why doesn’t it appear? What did I do wrong?”
A: This is a great question because it points out that WealthDocx® has different initial trust and assembly choices that affect the options that appear later in the WealthDocx 7 dialogue. The second screen that appears in the RLT module is the Revocable Living Trust Options:
When you click this option, the following screen will appear in the dialogue window:
The first option under “Type of Revocable Living Trust” gives you two choices for Trust Length: “Full” and “Simplified.” A “simplified” RLT is a trust that has fewer provisions than the full-length trust. It is not as specific as the full RLT, and relies more on state law instead of specific trust provisions to accomplish the grantor’s objectives. If you select this trust length option, some of the options that would normally appear if you were creating a full-length trust will be absent from the assembly dialogues simply because those provisions are unavailable in the simplified trust.
The following chart shows the provisions that are missing from the simplified trust:
| Article |
Main Difference |
| Establishing the Trust |
- No Distribution Trustee provisions
- No provisions exercising a testamentary Power of Appointment possessed by Grantor
|
| Family Information |
- No provisions for additional family information such as other family members or beneficiaries, deceased family members, or disinherited family members
|
| Trustee Succession |
- No provisions for a Trust Protector
- Death Trustees are by default the same as the incapacity Trustees (this can be changed in the interview so they are not the same in the assembled trust)
- No option to separately name trustees of the separate trusts
|
| Administration Upon Incapacity |
- Relies on the definition of incapacity in the General Provisions
- Relies on the options for determining incapacity in the General Provisions
- Disability priority is set to "Grantor's needs [and spouse's needs], then to needs of other"
- No provisions for gifting during incapacity
|
| Administration Upon Death |
- Apportionment of death taxes is as provided by state apportionment statue
- No provisions re. Retirement Plans
- No provisions re. Authority to Make Tax Elections
- No provisions re. Payment of Chartable Bequests
|
| Specific Distributions and Disposition of Tangible Personal Property |
- No option for Testamentary Charitable Remainder Trusts for Specific Purposes
- Tangible Personal Property (that is not disposed of by memorandum if that option is selected) is distributed to the spouse (if there is one) or if spouse is deceased then under the terms of the trust
- Only outright pre-residuary distributions
|
| Division of Property Upon Death |
- Marital Deduction Planning options are:
- All to Marital Share
- All to Marital Share, with any disclaimed amounts going to Non-Marital Share
- Clayton Election
- Fractional Marital Formula
- Statutory minimum to Marital Share (if individual trust)
- No explicit division into GSTT Exempt and Nonexempt shares (uses default language in Trust Administration article only)
- No option for alternative distribution if estate tax is repealed
|
| [All Trusts] |
- No option is presented for discretionary distributions. Instead the language is determined by the default preferences setting as follows:
- If the default preference is for the Trustee to "make distributions pursuant to ascertainable standards" in all cases then that language is merged
- If the default preference setting is set to any other option, then an Independent Trustee may make distributions for any purpose and an Interested Trustee may only make distributions pursuant to ascertainable standards
|
| Marital Trust |
- No option for General Power of Appointment over accrued but undistributed income remaining in the Marital Trust (Stub Income)
|
| Bypass Trust |
- The nonmarital share goes to a bypass trust (no option to allocate to Residuary)
- Beneficiaries can be either:
- Spouse
- Spouse and descendants
- Priority is to spouse, then descendants
- No Total Return Trust option
|
| Distribution of Remaining Trust Property |
- Residuary options are
- Outright to descendants, per survivorship option
- Equal shares for living children and descendants of deceased children, each share held in trust. Terms of the trusts stated once and applied to all descendants' trusts
- Shares for named beneficiaries. Terms of the trusts stated separately for each beneficiary
|
| Trustee Powers |
- This article is substantially redacted. It includes general statement of powers, incorporating state law and optionally includes a list of specific powers.
- Included at the end of the Trusts Administration article instead of having its own article.
|
Because those provisions don’t exist in the templates for the simplified trust, you obviously won’t find design questions about them in the dialogue screens. If the member who submitted this question had specified a “simplified” trust length, then the option for charitable planning of the residuary amount would not appear because we do not offer charitable provisions of this type in the simplified trust.
So, if you think you are missing an option that should have appeared, check the “Revocable Living Trust Options” screen. Maybe you should have selected the “full” rather than the “simplified” trust length!
In our next blog, we will discuss the difference between the “complete” and “express” interviews.
Yours for better drafting,
Thomas Ray
Executive Editor, WealthCounsel