Are you wondering whether a trust may be useful to your estate plan? Are you the beneficiary of a trust? Are you the trustee of a trust?
If the answer to any of these questions is yes, read on!
The very most basic way to form a trust is to give something to someone else (a “Trustee”) for the benefit of a third person or entity (a “Beneficiary”). I could write a check to a friend, made payable to “John Smith, as trustee for the benefit of Jane Doe,” and in so doing, form a trust. Of course, I would want to give instructions to my friend, John Smith, as to how I wanted him to administer the trust, and I would want those instructions in writing. Furthermore, I would want John to agree to those instructions by signing them. These written instructions, signed by the “Grantor” (or “Settlor”) of the trust and the Trustee, would be called the “trust agreement.”
Trusts are very flexible legal entities. One can form a trust during one's lifetime, such as in the above example; these are sometimes called “inter vivos” or “living” trusts. Alternatively, one can put trust language in one's will; these are called “testamentary” trusts. A common reason we help clients form trusts is that the beneficiaries are on some form of public assistance that has an asset threshold, such as Social Security or Medicaid; in these cases, we prepare special needs trusts.
Another common reason people form trusts is to preserve camps within their families. Trusts can also be very useful in long-term care planning. Additionally, trusts are helpful in minimizing estate taxes (allowing couples to maximize the "portability" of the estate tax exclusion).
We commonly advise clients who are trustees of trusts. We also serve as trustees of several trusts.
Do you have questions about trusts? Give us a call!