How is a family trust established?
Trust can mean different things to different people. Trust can mean that I have confidence in you or what you’re saying.
Trust in the context of estate planning is an excellent way to ensure your estate goes to those you wish it to go to upon your passing, or used for the purposes you want while you’re alive.
For example, you may be interested in setting up a family trust as part of your estate planning process, or if you have a child or family member who requires specialized care.
What is a Trust?
A trust is a legally binding document that describes how your assets will be handled while you are living, if you become incapacitated, and after your pass.
Some facts to know about trusts:
- Trusts bifurcate (split) the legal title of property from the beneficial interest (who may use the property) of that property. In other words, we typically are the owners of our property and the person who uses the property. Property being used in the broadest terms to include real property and intangible property (bank accounts, investments, etc.). A trust allows one person to legally hold title to the property while allowing another (or others) to enjoy the usage of that property.
- The person who creates the trust is called a grantor, settlor, trustor, or trust maker. For estate planning purposes those terms are interchangeable. We use the term grantor
- Those who can receive from the trust (or use the property) are called the beneficiaries. There are lifetime beneficiaries (those that can receive from the trust while the grantor is alive) and final beneficiaries (those that will receive when the grantor passes).
- The person the grantor appoints to execute the terms of the trust and hold legal title to the property (real or intangible) is called the trustee
There are only two types of trusts:
- Testamentary Trusts. Those that are created by way of a will upon a person’s passing. They are irrevocable and cannot be changed without court permission. Testamentary Trusts are also subject to ongoing court overview until the trust terminates.
- Inter Vivos Trusts. Those that are created while you are still alive (thus the term inter vivos – while living). There are many types of Inter Vivos Trusts including Revocable, Irrevocable, and special needs trusts just to name a few. The two most common types of inter vivos trusts are:
- Revocable Trusts. These types of trusts can be changed or canceled at any time. You can be the trustee and hold legal title as trustee (retain control over assets) and you can be the beneficiary (enjoyment of all of the assets) placed in a revocable trust while you are still alive. In other words, anything held by you as trustee, can be used to benefit you as well as the beneficiary. Want a new car? Go buy one! Need money for groceries? Use your trust money.
Irrevocable Trusts. The term “irrevocable” can be misleading. As confusing as it might be, an irrevocable trust can be revoked. What makes a trust irrevocable is that fact that you must give up the direct access to something held by the trustee. Most often that is the right to directly access the assets held by the trustee (which can be you!) in the trust. For example, you can’t buy groceries for yourself with money held in this type of trust. At the same time, because an irrevocable trust is more restrictive, we often utilize these types of trusts when planning for long term care costs and as a way to provide asset protection.
Why should you consider having a trust? Here are just a few benefits of having a trust:
- Avoid probate. Probate can be a time-consuming process where assets are collected, creditors are paid, and the remaining assets are distributed according to a will or the laws of the state where the decedent was domiciled at the time of death. Assets placed in a trust are not subject to probate, saving your family time and headaches.
- Unified estate plan. A trust provides you a single mechanism for distributing your assets after you pass. It provides a single point of distribution for all your property (real and intangible) provided you have properly titled your property. Don’t worry! We help you with that, too. For example, if you have a bank account, a car, a home, and a life insurance policy and you want to change who the beneficiary is on those (maybe another child or grandchild is born?) then you have to change the beneficiary on each one of those assets. If those same assets were owned by a trust, you would only have to change the trust, not each one of those assets individually.
- Long-term care assistance eligibility. If you have a family member in need of long-term care (at home, assisted living, or a nursing home), assets placed in an irrevocable trust will not be included as part of their net worth when determining eligibility for assistance. However, depending on when you apply for benefits, there may be consequences for having transferred assets to an irrevocable trust, so beware!
- Protection from lawsuits. Assets placed in certain types of trusts cannot be touched in the event you are sued.
- Minimize estate taxes. Trusts can help minimize your estate and gift taxes.
How Donald Law Office Can Help
If you are interested in setting up a trust, the attorneys at Donald Law Office can help! We have years of experience creating trusts uniquely designed to fit your individual needs and we ensure that we clearly explain this complex area of the law in simple, understandable terms.
You will meet with one of our attorneys who will explain all of your options and answer any questions you have. Then, if you determine a trust is right for you, that attorney will walk you through the process from start to finish. Your meetings will always be with one of our attorneys when you do a trust with Donald Law Office.
We can make recommendations and help you appoint a trustee, add assets to the trust, and address any concerns that may come up at any time. Establishing a trust is just the beginning of our relationship with you. We are by your side whenever you need us. We want to establish relationships with people, not just have transactional clients.
Our goal is to alleviate your stress and give you peace of mind that your family and your assets will be taken care of now and in the future.
Contact us for an initial consultation, and we will help you create a trust that’s right for you.
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