What Do I Really Need to Know About Trusts?
Living Trust

What Do I Really Need to Know About Trusts?

A trust is an agreement between two parties, the settlor and a trustee. They may be used for many purposes nut all of them require the trustee to accept, manage and protect assets delivered by the trustmaker, administer those assets according to the trustmaker’s instructions, and distribute the income and principal only for the benefit of those that are named.

Kiplinger’s article “Trusts 101: Why Have a Trust?” explains that the trustee is a fiduciary and must act with reasonable care in administering the trust and selecting trust investments. She also must avoid any conflict of interest or self-dealing in holding, purchasing and selling trust assets, and diligently avoid breaching any of the trustee’s duties to the settlor and beneficiaries.

The trustee must follow the trustmaker’s terms. She must also be wise in making investment and administrative decisions and be objective and transparent.

Trusts can be created for several reasons, such as the following:

  • To oversee spending and investments to protect beneficiaries from poor decisions;
  • To avoid court-supervised probate of assets;
  • To allow for privacy;
  • To shield assets from the beneficiaries’ creditors;
  • To keep premarital assets from a division of assets between divorcing spouses;
  • To earmark funds to support the settlor, when incapacitated;
  • To manage unique assets that aren’t easily divisible, such as a vacation home or a pet;
  • To manage closely held business assets for planned business succession;
  • To hold life insurance policies, pay premiums and collect the tax-free proceeds to care for beneficiaries, fund closely held stock redemptions or purchases and provide liquidity to the estate;
  • To provide structured income to a surviving spouse that shields trust assets for descendants, if the spouse remarries; and
  • To decrease the amount of income taxes or to shelter assets from estate and transfer taxes.

A trust can be set up to achieve specific goals and give tools for the trustee to balance those goals with investment and economic factors.

The most common type is a revocable living trust. It’s usually not funded until your death. It will include your instructions for how you want your estate divided among your beneficiaries and how each person’s share is managed, administered and distributed. They are flexible, so that as children grow into adulthood, you may make changes to reflect life events.

Talk with an estate planning attorney and create your estate plan with a will and a trust.

Learn about the many benefits of a revocable living trust.

Reference: Kiplinger (June 11. 2019) “Trusts 101: Why Have a Trust?”

Does Good Estate Planning Prevent Family Fights over Personal Items?
Good Estate Planning Prevents Fights Over Personal Items

Does Good Estate Planning Prevent Family Fights over Personal Items?

A few years after her death in 2014, Joan Rivers’ family put hundreds of her personal items up for auction at Christie’s in New York. Do families fight over personal items? Can good estate planning minimize the chances of fighting? Good estate planning is critical to family harmony over the small stuff.

As The Financial Times reported in “Why an art collector’s estate needs tight planning,” a silver Tiffany bowl, engraved with her dog’s name, Spike, made headlines when it sold for thirty times its estimated price.

This shows how an auction house can generate a buzz around the estate of a late collector, creating demand for items that, had they been sold separately, might have failed to attract as much attention.

A problem for some art and collectible owners is that their heirs may feel much less passionately about the works, than the person who collected them.

A collector can either gift, donate or sell in their lifetime. He or she can also wait until they pass away and then gift, donate, or sell posthumously.

The way a collector can make certain his or her wishes are carried out or eliminate family conflicts after their death, is to take the decision out of the hands of the family, by placing an art collection in trust.

The trust will have the collector’s wishes added into the agreement, and the trustees are appointed from the family and from independent advisers with no interest in a transaction taking place.

Many collectors like to seal their legacy, by making a permanent loan or gift of art works to a museum.However, their children can renege on these agreements, if they’re not adequately protected by trusts or other legal safeguards after a collector’s death.

Even with a trust or other legal structure put in place to preserve a legacy, the key to avoiding a fight over a valuable collection after the death of the collector, is to have frank discussions about estate planning with the family well before the reading of the will. This can ensure that their wishes are respected.

Learn more how a last will and testament can lay out your wishes and set expectations about personal items.

Reference: Financial Times (June 20, 2019) “Why an art collector’s estate needs tight planning”

What Do I Need to Know About Revocable Living Trusts?
Revocable Living Trust Planning

What Do I Need to Know About Revocable Living Trusts?

A trust including a revocable living trust is a fiduciary arrangement that lets a third party (the “trustee”) hold assets on the behalf of a beneficiary. Revocable living trusts can be drafted in a variety of ways and can specify exactly how and when the assets pass to the beneficiaries.

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.

FedWeek’s recent article, “The Basics of Trusts,” explains some of the benefits of having a trust in your estate plan. Trusts can offer the following:

  • Protection for possible incompetency. You can form a trust and transfer your assets into it. You can be the trustee, and you’ll have control of the trust assets and keep the income. A successor trustee will assume control, if you’re incapacitated.
  • Avoiding probate. The assets held in trust avoid probate, which can be expensive and time-consuming. In the trust documents, you can direct the trust and provide how the trust assets will be distributed at your death.
  • Protection for heirs. After death, a trustee can keep trust assets from being spent all at once or lost in a divorce, with specific instructions in the trust document.

A trust can be revocable or irrevocable. A revocable trust has to be created during your lifetime. If you change your mind, you can cancel the trust and reclaim the assets. With a revocable trust you can enjoy incapacity protection and probate avoidance—but not tax reduction. In contrast, an irrevocable trust can be created while you’re alive or at your death (a revocable trust becomes irrevocable at your death).

Assets transferred to an irrevocable trust during your lifetime may be shielded from creditors and divorce settlements. The same is true for the assets put into an irrevocable trust at your death.

Your heirs can be the beneficiaries of an irrevocable trust. The trustee you’ve designated will be tasked with distributing funds to the beneficiaries. The trustee will be responsible for protecting trust assets.

Contact an experienced trust attorney with your questions about possibly creating a trust for your situation.

Learn more how trusts can play a very important role in your estate planning.

Reference: FedWeek (May 9, 2019) “The Basics of Trusts”