Articles Posted in Trusts

4.8.19The last step of an estate plan is one that all too often gets forgotten. That’s too bad, because unless you retitle assets so that they are owned by the trusts created for the plan, means that all good planning could be worthless.

When you are done creating an estate plan, your estate planning attorney might give you a list of items that you need to take care of, including retitling or changing the ownership of things like bank accounts, brokerage accounts, shares of a privately owned business, real estate and other assets.

These assets must be put into the trust while you’re alive, to avoid probate or be distributed to the trust as a beneficiary upon your death.

7.24.19A trust is a complex document, but taking the time to read it a few times will prove enlightening. If you have questions, call your estate planning attorney, so they can help clarify anything you don’t understand.

Attorneys do try to simplify documents when they can, so that clients will have a better understanding of what goes into their estate plans. However, according to a recent article from Forbes, “A Beginner's Guide To Reading A Trust,” there’s still enough legal language in trusts that they can sometimes be confusing. Here are some basics about trusts.

First, familiarize yourself with the terms. There are basic terms of the trust that you’ll need to know. Most of this can be found on its first page, such as the person who created the trust. He or she is frequently referred to as the donor, grantor or settlor. It is also necessary to identify the trustee, who will hold the trust assets and administer them for the benefit of the beneficiaries, and any successor trustees.

7.11.19Think of trusts like the Swiss army knives of estate planning. There are many different trusts that are used to accomplish many different tasks.

At its essence, a trust is a legal document that permits a third party, called the trustee, to hold assets on behalf of a beneficiary. The trustee has a fiduciary duty to the beneficiary, that is, the trust must put the beneficiary’s needs first. The trust document is drafted to address issues like how and when assets pass to the beneficiaries, what conditions must be met for the beneficiaries to receive assets, etc.

Because trusts usually avoid probate, the beneficiaries can get access to these assets more quickly than they might if the assets were transferred using a will. If it’s an irrevocable trust, it may not be considered part of the taxable estate, which means there will be fewer taxes due at your death.

3.18.19You’ve heard the expression “trust fund babies.” However, trusts are not just for the wealthy. They have a number of uses in estate planning and can be helpful at any asset level.

The reality of our own mortality keeps some of us up at night. For others, it’s a disturbing thought that is easily brushed aside. Whichever group you belong to, you need to have an estate plan in place. This is the only way that you can have any say in how your assets are distributed after you pass. Without an estate plan, your family will be subjected to much more stress and financial strain. One part of an estate plan is a trust.

Barron’s recent article, “Why a Trust Is a Great Estate-Planning Tool — Even if You’re Not Rich,” explains that there are many types of trusts, but the most frequently used for these purposes is a revocable living trust. This trust allows you—the grantor—to specify exactly how your estate will be distributed to your beneficiaries when you die, and at the same time avoiding probate and stress for your loved ones.

12.26.18Trusts serve a variety of functions in estate planning, and they aren’t just for wealthy people.

Trusts can be simple, or they can be complex, depending on what type of trust is being considered and how they are structured. Trusts should be set up by an estate planning attorney, who is familiar with asset ownership and how trusts impact inheritances and taxes.

U.S. News & World Report’s recent article, “Setting Up a Trust Fund,” explains that a trust fund refers to a fund made up of assets, like stocks, cash, real estate, mutual bonds, collectibles, or even a business, that are distributed after a death. The person setting up a trust fund is called the grantor, and the person, people or organization(s) receiving the assets are known as the beneficiaries. The person the grantor names to ensure that his or her wishes are carried out is the trustee.

10.18.17For living trusts, the person or people who set them up are usually named the initial trustees, but after that, there needs to be a successor trustee. Think carefully about who you would want to take on these responsibilities.

When the first spouse dies, the surviving spouse usually becomes the sole trustee, according to the article, “Women on Money and Mindset: Estate planning: choosing a trustee,” in The (Riverside CA) Press-Enterprise. When the second spouse dies, the trust passes to a successor trustee or trustees. Most people name an adult child, trusted friend or a family member who they trust. You can also name a bank or a professional fiduciary.

Children: Married couples often will name their oldest child as the successor trustee or they name all their children to act as co-trustees. This can work if there’s never been a divorce; there is only one child; she lives close; she doesn’t work and all the assets are investment accounts.  However, most adult children will have full-time jobs. Adding the job of trustee can be a strain because it’s time-consuming and technical. The administrative burden of taking care of your final business can be overwhelming.

8.11.17Living trusts can achieve different goals, depending upon how they are drafted. Knowing the fundamentals will help you decide how to go forward.

It’s important to know that not all living trusts are the same. However, common reasons for using a living trust are for privacy and avoiding probate. Placing assets in a living trust also provides protection to beneficiaries from divorce, nursing home costs, legal actions and creditors. Should a living trust be part of your estate plan?

The Green Bay Press-Gazette’s recent article, “Common questions about a living trust,” notes that this can be especially important for a beneficiary who may have special needs. A Special Needs Trust can be created so their government program benefits, like Medicaid, won’t be impacted by their inheritance. Let’s look at some specific situations:

4.5.17When all of your time is spent battling the challenges of mental illness or addiction, it’s hard to imagine what the future will bring.  However, that’s exactly why estate planning is so important.

It’s not an easy issue to discuss with an estate planning attorney for the first time.  However, if your children, minors or adults, suffer from mental illnesses or addiction to drugs, alcohol, gambling or any other form of addiction, the attorney will need to know so they can advise you properly. As described in Trust Advisor’s helpful article, “Hope For The Best, But Build Trusts For The Future Of Children With Special Challenges,” there are certain planning techniques that could be used in these situations.

Before diving in, estate planning requires a parent to acknowledge that an addicted son or daughter may never recover. With this in mind, estate planning must be done so that the child never has easy access to the funds. In this instance, a trust with special-purpose language may be a wise option.

4.3.17The moment you become a parent, you need a will. The same is true once you acquire any kind of asset that you want to give to someone after you die. It’s really that simple.

The reasons why so many people don’t think they need a will fall into a number of different categories.  However, the two biggest ones are described in an article appearing in the Pauls Valley Daily Democrat titled “More on estate planning myths.” Chances are good you’ve heard them before, but you may not have heard why they are plain old wrong. Here’s why:

 “I’m young, so I don’t need a will.” This is not true. One of the most important parts of a will for a young couple, is a provision that designates a guardian—the person(s) who will care for their young children in the event of their mutual death. This is rare, although it does happen. To make matters worse, what if there’s a family fight for custody of your children? Make this selection so the court isn’t forced to select a guardian for your minor children if the event arises. A will can give you peace of mind concerning the care of your children.

8.31.16Trusts are not right for everyone, so they need to be fully explored before being created.

If someone says you need a trust as part of your estate plan, you should speak with an experienced estate planning attorney before moving forward. A recent post from NJ 101.5, “The disadvantages to trusts,” notes that there are situations when a trust is not the right planning tool.

Trusts can save on estate taxes but are typically subject to higher income tax rates than those of an individual taxpayer once the “grantor” (i.e., trustmaker) dies. Trusts have to pay income taxes on the income they generate by the assets they hold. Such irrevocable trusts hit the top bracket at a very low income threshold: $12,400 of taxable income in 2016. The top income tax bracket for an individual doesn’t happen until his or her income exceeds $415,050. Also, the additional 3.8% net investment income tax applies at low thresholds.

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