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Trusts

Trusts Attorney

One of the most important steps in Estate Planning is creating a will. Sometimes, however, a Will is not enough to protect your family and your property, especially when you have family members or dependents who may need more than money or property. In these cases, setting up a trust is the right answer.

The Serafini Smith Law Firm offers a full range of trusts, including:

  • Living Trusts/Revocable Trusts
  • Irrevocable Trusts
  • Spendthrift Trusts
  • Special Needs Trusts
  • and more
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trusts, trusts lawyer, trusts attorney

What Is a Trust?

Trusts have existed since Roman times and have become one of the most important innovations in property law. There are many different types of trusts, but the legal definition of a trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a settlor, who transfers some or all of his or her property to a trustee. The trustee holds that property for the trust’s beneficiaries.

An owner placing property into trust turns over part of his or her bundle of rights to the trustee, separating the property’s legal ownership and control from its equitable ownership and benefits. This may be done for tax reasons or to control the property and its benefits if the settlor is absent, incapacitated, or dead. Trusts are frequently created in wills, defining how money and property will be handled for children or other beneficiaries.

With so many choices, though, it can seem overwhelming. Proper legal counsel from an experienced Estate Planning & Trusts Attorney can help you navigate Trusts.

Protect Your Loved Ones

The trustee is given legal title to the trust property, but is obligated to act for the good of the beneficiaries. The trustee may be compensated and have expenses reimbursed, but otherwise must turn over all profits from the trust properties. Trustees who violate this fiduciary duty are self-dealing. Courts can reverse self dealing actions, order profits returned, and impose other sanctions.

The people involved in a trust are as follows:

  • Grantor -The settlor, trustor, or trustmaker, this is the person whose trust it is. Only they can manage or change the trust. If the grantor is a married couple, they are co-grantors.
  • Trustee – Manages the assets within the trust.
  • Successor Trustee – Takes over when the trustee is no longer able to manage the trust.
  • Beneficiaries – The persons or organizations who will receive trust assets after the grantor passes away.

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trusts, trusts lawyer, trusts attorney

Who Should I Choose as My Successor Trustee?

If you have a Revocable Living Trust, you’ve probably chosen yourself as the trustee for now. But someone else will need to step in if you are incapacitated or pass away.

Choosing a Trustee is a very personal decision, that should be taken quite seriously.

Your trustee will take responsibility for the assets in your trust, manage the money, and should only use the assets in the beneficiary’s best interests.

The trustee may be either an individual, a company, or a public body. There may be a single trustee or multiple co-trustees. It’s up to you, the grantor.

Your successor trustee will act without court supervision, so it’s up to them to get things started and keep them going. Your CPA and other advisors can guide them, but it is still essential you choose someone who’s conscientious and responsible.

As a Trustee, the chosen person will:

  • identify and protect any trust assets
  • discover the trust instrument (the document that created the trust) requirements
  • be 100% honest
  • communicate with the trust beneficiaries on a regular basis
  • manage the assets over the long-term (or distribute them to the beneficiaries right away)
  • end the trust when it’s time (as determined by the trust instrument)

The trust is governed by the terms under which it was created. In most jurisdictions, this requires a contractual trust agreement or deed.

trusts, trusts lawyer, trusts attorney

Benefits of Trusts

Control Your Wealth

You can exactly specify the terms of your trust, and control when and to whom your assets may be distributed. For example, you could set up a revocable trust so your trust assets cannot be accessed during your lifetime while designating who they will go to thereafter. This can be used even when there are complex situations, like children from multiple marriages. Only you get to decide when your assets are distributed, how they’re distributed, and to whom they’re distributed. In other words, if you want to prevent Uncle Jim from accessing any of your assets, you can. If you want to give everything to your children or only certain assets, you can. It’s all up to you. You have complete and total control over who gets access to your assets and who doesn’t, where the money goes, and how it’s used.

Protect Your Legacy

When handled properly, a trust can help protect your estate today, and in the future. In addition, it can protect your estate from creditors and/or beneficiaries who may be irresponsible with money. In any case, a trust can protect your assets and your legacy. It gives you peace of mind that your estate will be distributed properly. Furthermore, trusts can prevent you from unintentionally disinheriting someone, protect your assets from specific people, and help care for family or loved ones with special needs in the future. Knowing this will give you peace of mind in the future, as you will have taken care of everything early on. A trust can also provide that same comfort and security to your loved ones, knowing that they’re safe and taken care of, and you’re protected for the long-term.

Save Time, Money, and Your Privacy

A living trust can avoid probate altogether. Depending on your situation, probate can sometimes become a long, drawn-out, expensive process. This may not only delay distribution of assets to your beneficiaries, but also reduce how much they inherit. A trust handles distribution of your assets without court intervention. The trustee distributes assets according to instructions given by the trust creator. This means faster estate distribution, often shortening the time frame from years or months to weeks – without any extra expenses to the estate. This option is particularly helpful if you own property in another state. Finally, a living trust protects your privacy, as it is a private document between the parties involved. No one can search public records and find information regarding your trust. A will, on the other hand, is public record.

Types of Trusts

  1. Revocable Trusts – Also known as a Living Trust. In this case, the trust creator can change or revoke the terms of the trust at any time. He or she can also change the beneficiaries at any time. The most common uses of a Revocable Trust are to plan for mental disability and avoid probate of assets that the trustmaker funds in their trust. In most cases, the trustmaker, trustee, and beneficiary are all the same person with a Revocable Living Trust.
  2. Irrevocable Trusts – In an Irrevocable Trust, the trust beneficiaries have more rights. The person who creates an Irrevocable Trust cannot undo or revoke any of the terms within it. The most common use of an Irrevocable Trust is for moving assets out of the trustmaker’s name and control to eventually transfer to the next generation.
  3. Irrevocable Life Insurance Trusts – This is designed to exclude life insurance proceeds from the decedent’s taxable estate, while also providing liquidity to the estate and trust’s beneficiaries. The trust basically owns the policy, so that’s why it is excluded from the taxable estate.
  4. Marital (A) Trusts – This trust protects your spouse in case of your death, providing them with benefits, included in the taxable estate of the surviving spouse.
  5. Bypass (B) Trusts – This type of trust is also commonly known as the credit shelter trust. It’s used to bypass the surviving spouse’s estate so they may make full use of any federal estate tax exemption for each spouse.
  6. Special Needs Trusts – Usually this type of trust is set up to care for a disabled beneficiary in a way that doesn’t endanger their entitlement to Supplemental Security or Medicaid benefits.
  7. Spendthrift Trusts – This trust is meant for people who are wary of the spending habits of their beneficiary. The trustee is given discretion as to how and when distributions should be given to the beneficiary. This is often used to protect against financially irresponsible beneficiaries or to safeguard any inheritance in case the beneficiary divorces.
  8. Charitable Lead Trusts – This type allows certain assets to be sent to a charity, while the rest are distributed to your beneficiaries.
  9. Charitable Remainder Trusts – This trust allows you to receive an income stream for a specific time period, and decide that the remainder goes to charity.
  10. Generation-Skipping Trusts – The Generation-Skipping trust allows you to distribute assets to grandchildren, without incurring a generation-skipping tax or estate taxes on the subsequent death of your children.
  11. QTIP Trusts – QTIP stands for Qualified Terminable Interest Property. This type of trust provides income for a surviving spouse. When the spouse passes away, the assets are then distributed to additional beneficiaries named by the trustmaker. This is most commonly used in second marriage situations.

Frequently Asked Questions

Do I still need a Will if I set up a Living Trust?

Yes, you do. A will handles any property not included in your living trust. This could have been left out for a myriad of reasons. For example, property that wasn’t properly transferred into the trust can be distributed using your Will. The Will also includes any property bought or received after the trust was created, unless you transfer the property to, or purchase it in the name of, the trust. A Will also covers property you left out of the trust on purpose, like cars or bank accounts.

Can Trustees get help?

As trustee, you are responsible for the trust’s assets, but that doesn’t mean you can’t ask for help. In fact, you absolutely should be asking for help along the way. You can use trust assets to pay for help from experts like administration attorneys. These people can guide you through the process, even if you like doing most of the work yourself. It’s also a smart idea to hire an accountant or tax preparer to help you prepare the trust’s tax return, which is usually due on April 15th the year after the grantor passed away. The accountant can advise you on any income tax issues as well.

Can I transfer property in and out of my trust while I’m alive?

Yes, absolutely. If you have an individual trust, you can transfer property in and out of it whenever you like. You do not need permission from anyone else to do so. However, if you share a trust with someone else, you will need to get your co-trustee’s consent first.

Can I include property in my Trust that I still owe money on?

Yes! The best example of this is a home with an attached mortgage. Your beneficiary will become responsible for the debt (mortgage) when they receive the property. If you’d like your trust to first pay the balance of a mortgage (or another debt) before it’s distributed to your beneficiary, let your Trusts Attorney know.

When should you update a Trust or Will?

Contact The Serafini Smith Law Firm

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