Trusts are agreements between a Trustor and a Trustee to hold, use, and eventually distribute property for the benefit of the Trust’s Beneficiaries. A Trustor is the creator of the Trust, and usually the person who funds the Trust with his or her property. The Trustee is the person who receives property in trust for someone or something else. The Beneficiary is the person or thing that will benefit from the Trust. In most estate plans, the children, grandchildren, and/or charities are the beneficiaries of the Trust.
Trusts are important
Trusts have several advantages. First, they help you manage your affairs while alive. Second, they avoid potentially expensive and time consuming probate procedures. Third, they let you be very creative when distributing your assets. Trusts also serve other purposes such as tax planning, but that is usually not an issue for most people.
A Trust contributes to estate planning
The other three primary estate planning documents operate as follows: A Will disposes of property after you die. If used in conjunction with a Trust, only non-titled property needs to be transferred after death and in many cases, this can be done without court supervision. Trusts should always be used in conjunction with a Will.
A Power of Attorney is a document that gives one person to act in the name of another person as if that person were acting themselves. Some common uses for a Power of Attorney include contacting and conducting business with utilities or government entities for someone who is getting too old, tired, or is too ill to properly handle their affairs.
Advanced Health Care Directives, a derivative of the old living Wills, primarily helps a person with two things. Advanced Health Care Directives allow you to select an agent to speak to your health care providers and make some important decisions when you are unable to speak for yourself. This document also assists you in declaring when to pull the plug. It includes such options as designating that an agent can decide, that life should be prolonged, or that life support should be withdrawn under various pre-selected circumstances.
In sum, a Trust doesn’t outline your medical decisions, but it can help fund your medical needs. It can also assist you in life by having someone you chose to handle your assets when you are no longer able to do so yourself. A Trust also holds your property while in life and avoids probate.
How Trusts are used
Estate planning includes planning to manage your affairs during your life as well as planning for after you die. Trusts play a pivotal role in many people’s estate plans. Take, for example, the elderly widower, who, as he aged, could no longer care for himself. His home was his primary asset. As it became necessary to move him into a care center, the home may became vacant, with a small mortgage to pay. Luckily, the family had planned ahead, placing the home into a Revocable Family Trust. The successor trustee then sold the house to pay for the care center. The family never needed the use of the courts to help them do this. Generally, the cost to obtain a guardianship/conservatorship (one alternative to a Trust) significantly exceeds that of the cost to plan properly.
Trusts are also used to pass your property down to your heirs after you die. Using a Trust lets you bypass probate. Probate is the court process by which the personal representative obtains a court order directing them to distribute the property in accordance with the terms of a Will. Probate can be an expensive and lengthy process. Because a Trust is set up so that a new trustee simply takes over the affairs of the Trust, no court order is needed to authorize the transfer of property. This saves time and money.
Utah is one of the few states that permit a Dynasty Trust. Even after you die, you can still do a lot of good in the world. In Utah, a Trust can last up to 1,000 years. See Utah Code 75-2-1201 et seq. During this 1,000-year period, your estate could produce many good works. The terms and conditions can be set by you. Most clients want to provide for their children and grandchildren as they grow up. Some Trusts provide very specific detailed instructions for distributions. We have drafted Trusts that provide employment and college scholarships. Some provide for piano lessons, trade school education, and bonuses for good grades. Some people choose to make political contributions, contributions to their church, donations to other worthy charities, and even donations to favorite sports teams. Even the beloved family pet can be cared for through your Trust. The possibilities are seemingly endless.
How you know if you need a Trust
Many people wonder if they need a Trust. To know if a Trust is a good document for your estate plan, you should ask yourself the following questions:
Do I have real estate or property exceeding $ 100,000 in value that I want distributed to someone when I die, and if so, do I care where or to whom it goes? Am I concerned that I might want help with my real estate or other property as I get older? Might I go into a care center and own real estate or other property that I cannot continue to take care of while I am at the care center?
If you answered yes to any of these questions, then a Trust may be right for you.
When do I need to change my Trust and when do I need a new Trust?
A change in a Trust or a new Trust may be appropriate when you have what attorneys call a “change in circumstances”. Changes in circumstances are a broad and generic term for people related changes such as a marriage, the birth of a child, the death of a family member or key person in your estate plan (such as the successor trustee). A change in circumstances also covers changes in your financial status or that of the beneficiaries. You may also find that your original estate plan is not what you want anymore.
A common reason to change estate plans comes from changes in federal law. Not too many years ago, federal law didn’t allow both the husband and the wife to use each other’s death tax exemptions. To solve this and minimize the taxes, attorneys used to draft A/B Trusts. The law now allows the shared use of the death tax exemptions (called “portability”) and therefore the extra restrictions in an A/B Trust are no longer necessary.
When to change a Trust vs. when to start over with a completely new Trust can be a matter of preference and cost. Trusts are changed with a document called an amendment. Generally a minor amendment to a Trust, such as just changing the successor trustee, or adding a child, can be cheaply accomplished with an amendment. A complete revamping of your entire estate plan probably calls for a new Trust as the lawyers can generally draft a new Trust faster than reading through your old Trust and addressing every change you want made. This is especially true when converting some A/B Trusts to the currently favored standard revocable Trusts.
Where should I go for a Trust?
There are many sources one can go for a Trust. The least expensive, and possibly most likely to cause litigation, is to draft a Trust one’s self. I have never seen a non-attorney draft themselves a Trust. It’s probably not very wise. A person can also go to various online retailers or even purchase forms from an office supply store. These often work okay, but are not always as flexible as you might want in your estate planning. Lastly, you can visit an attorney. Attorney Paul R. Maxfield emphasizes estate planning in his practice at the Maxfield Law.
To see what trust attorney Paul Maxfield can do to for your estate planning needs, call Maxfield Law today. (385) 298-0700.