Living Trusts - Four Life Cycle Stages STAGE #1: YOU ARE ALIVE & WELL You continue to control your assets as trustee and have the right to amend or revoke the trust. You file your taxes and conduct your banking activity as you did before. However. you must remember to title newly acquired assets in the name of the trust as failure to do so may trigger probate administration of your estate. STAGE #2: YOU BECOME INCAPACITATED SUCCESSOR TRUSTEE HANDLES YOUR AFFAIRS WHEN YOU CANNOT Your Successor Trustee steps in and handles your financial affairs for you without the intrusion of the probate court. He/she can write checks, make deposits, apply for disability benefits, pay bills, sell property, and do anything necessary to keep your financial and personal affairs in order. PROTECTION AGAINST GREEDY RELATIVES AND CON ARTISTS PROVISIONS RELATING TO HOME CARE Your Successor Trustee is enabled to enter into contracts for the full or part time services of companions, licensed registered or practical nurses, and household help, as well as convalescent care, extended care, or nursing home care STAGE #3: 1ST SPOUSE DEAD; 2ND SPOUSE ALIVE COMBINED ESTATES UNDER $1,000,000 (for 2002-2003) - TWO LIVING TRUSTS OR JOINT TRUST (potential for estate tax savings) Generally, prior to death assets are equally divided (funded) between the husband's living trust and the wife's living trust, with possibly some assets retained in joint tenancy or transferred to joint trust. Surviving spouse may be entitled to all income from decedent's living trust, but principal is invaded for health, education, support or maintenance. DISCLAIMER TRUST: If the surviving spouse wants absolute control over the decedent's assets yet wants to maintain flexibility for tax planning, a DISCLAIMER TRUST may be advisable. Under this technique, all assets from the decedent's living trust are bequeathed to the surviving spouse. However, the surviving spouse has the option to disclaim such assets into a credit shelter trust to utilize the decedent's unified credit. Generally, the surviving spouse would consider disclaiming if the disclaimer has potential to save estate taxes based on the existing law and assets at the time of the 1st spouse's death. COMBINED ESTATES OVER $1,000,000 (for 2002-2003) - generally TWO LIVING TRUSTS OR JOINT TRUST (up to $435,0000 tax savings) Generally, prior to death assets are equally divided (funded) between the husband's living trust and the wife's living trust, with possibly some assets retained in joint tenancy or transferred to joint trust. Surviving spouse may be entitled to all income from decedent's living trust, but principal is invaded for health, education, support or maintenance. Upon death, the decedent's living trust may be further split as follows: -The UNIFIED CREDIT SHELTER TRUST is that portion of the living trust up the 1st $1,000,000 (for 2002-2003) The surviving spouse (and/or children) receive the income but principal can be invaded only for health, education, support, or maintenance. -The MARITAL TRUST is funded with amounts over $1,000,000 (for 2002-2003) contained in the decedent's living trust, The surviving spouse has the right to trust income and can have either unlimited or restricted ("QTIP") rights to principal. Example: John and Mary's combined estates total $2 MILLION. John sets up his living trust and Mary sets up her living trust. Each trust is funded with $1,000,000.Upon John's death, John's living trust (unified credit shelter trust) totals $1,000,000 and Mary will live on the following assets: (1) income and principal from her living trust; (2) income from John's unified credit shelter trust; (3) principal from John's unified credit shelter trust for her health, education, support, or maintenance. STAGE #4: BOTH SPOUSES DECEASED Your Successor Trustee basically acts as an executor would if you had a will, but does not report to the probate court. He/she pays your debts and then follows your instructions for distributing your assets to your beneficiaries. Principal Distributions to Beneficiaries may be made either IMMEDIATELY or BASED ON PREDETERMINED AGES (staggered distributions) i.e., such as 1/3 at age 25, 1/3 at age 30 and remaining 1/3 at age 35. For special situations (alcoholic or special needs children), a child's share can be kept in trust indefinitely.

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