Articles Posted in Trusts

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If someone close to you passes away and you receive the information that they had named you as trustee, you may find yourself feeling overwhelmed if you do not know what is needed to fulfill this role and if you have not served as a trustee before.

Serving as a trustee isn’t an innate skill that everyone has, and there are many responsibilities and duties that someone must take on in this role. Different states may have some specific duties and responsibilities that vary, but here is a general list to help you begin:

  • Duty to Administer the Trust: A trustee is to administer the trust in good faith upon acceptance of the trusteeship.
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How you title your real estate holdings is key to making sure your assets are transferred according to your wishes after you have passed away. In making decisions about how to title your assets, you’ll want to consider things such as avoiding probate, minimizing estate taxes, and liability protection.

Avoiding Probate

People often want to avoid probate if at all possible. Here are some common ways to do so:

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A trust is a legal document that you can use to give assets to others. A trust can be revocable or irrevocable. As the creator of the trust, you can modify a revocable trust at any point throughout your lifetime. If you decide on an irrevocable trust, though, you generally will be unable to make changes to this type of trust after you have created it.

A lot of people are concerned about the term “irrevocable” since they associate this term with permanency and are afraid that this type of trust could turn out to no longer be compatible with their wishes as their life circumstances change. There is, however, a way to deal with changes in life circumstances after the creation of an irrevocable trust using “trust decanting.”

What Is “Decanting” a Trust in Estate Planning?

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Last week I started writing about moving trusts from one state to another. In today’s post, I’ll share a few more things to consider if you are moving from one state to another, including the way states may treat marital property differently.

States Treat Marital Property Differently

Although most states are common law states which allow marital property to be owned separately, there are several community property states. In community property states, all of the property owned by marital partners is deemed equally shared, including property that is only titled in one spouse’s name.

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If you have a revocable living trust and decide to move from one state to another, your trust should remain valid in your new state. Though the validity of this trust won’t be affected, you might want to make some changes to it since different states can have different laws regarding things such as marital property. Also, if you are moving into a new home you are buying, you will need to transfer this asset to the trust. Below is more information about trusts and moving a trust to a new state:

Using Trusts in Estate Planning

Revocable living trusts are often used in estate plans to help shelter assets from probate, to protect private finances from public scrutiny, and to provide additional control over the disposition of assets after the owner has passed away. Trusts can save money and time when it comes to settling an estate, and they can help ensure that dependents and charities are supported.

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Although we may think of phishing emails, robocalls, or other types of scams when we think about financial exploitation, it is far more common for this type of exploitation to be done by relatives, caregivers, neighbors, or friends someone believed they could trust. Financial exploitation is more common than most people realize, but understanding financial abuse and strategies can help people avoid being exploited.

Several studies have shown that individuals who have a cognitive impairment, are in poor physical health, are isolated, or have a learning disability may be more at risk for financial abuse.

Studies have also revealed common characteristics of individuals who financially exploit others, including those who have substance abuse issues, mental illness, or who are financially dependent on the person they are exploiting.

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A lot of people are part of a blended family. It’s important for those in this type of family to make sure that stepchildren are incorporated into their estate planning process.

Many stepparents love and care for their stepchildren as their own children, and they may not be aware that this emotional bond is not one that is protected by law. Laws of inheritance do not apply to stepchildren unless they are formally adopted. Without a legal relationship to your step children, you will need to be clear in your estate plan that you wish for your estate to benefit them.

Often, remaining property is left to children equally in estate plans. However, this type of language only applies to biological and adopted children. Although people believe their family will understand the decedent’s wishes and share things evenly, this is not always the case.

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People with revocable living trusts often name a family member (spouse, oldest child, etc.) as their successor trustee. The successor trustee is who takes over the administrative duties for the trust in the event you become incapacitated or die.

However, naming only one successor is probably not enough. It is better to name a secondary successor trustee in case the first one is unable to serve as trustee when the time actually arrives. There are a number of reasons this may happen, including the following:

You could both be injured or die in a common accident

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It’s rare for an estate plan to be put together and never be changed. Wills and trusts usually need to be changed over time as your circumstances, states of residence, and desired outcomes shift. It is important to know how you can properly change your will or trust so that these revisions will be enforced.

Writing on your will or trust to edit or amend it or attaching a hand-written addendum to this document isn’t a good idea. States have different requirements for how to change a will or trust, so it’s important to learn what is considered legally valid in your state.

For a will, a legally enforceable change can be accomplished by replacing the prior will document with an entirely new one (you’ll also want to explicitly state in the new document that all prior wills are revoked and replaced) or by adding a document called a codicil to the old will document. The codicil should specify exactly what part of the old document is being changed, and it will often reaffirm the other terms of the old will document that remain unchanged.

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As is the case with many questions regarding legal matters, this depends on some different factors. It is more simple to name your spouse directly, and your spouse could then convert your retirement plans to their IRA and take withdrawals on their schedule.

That being said, trusts have a number of advantages. Trusts can provide a lot of protections, including greater creditor protection compared to retirement funds, protection in the event your spouse becomes incapacitated, protection from scams (as seniors are often targeted), and protection of assets from having to be spent paying for long-term care. They can also preserve funds that are not needed by your spouse for your children.

Trusts can also be a useful estate planning tool. As the threshold is just over $12 million, most Americans don’t need to worry about the federal estate tax. However, many states have their own estate taxes, including some with the threshold as low as $1 million. A trust can protect this amount from being taxed following the death of the survivor of yourself and your spouse.

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