What is a trust?
A trust is a document that is similar to a contract. You nominate someone you know and trust as your “successor trustee” who will manage and control your trust assets upon your incapacity and/or death.
Why are trusts beneficial to my loved ones?
Trust assets avoid probate. By titling your assets in the name of your trust, all trust assets avoid probate. Your loves ones need not lose their inheritance by paying unnecessary court costs, filing fees and attorney fees. The terms of the trust empower your successor trustee to pay and file your state and federal income taxes, any federal estate taxes, pay any and all creditors claims and debts owed by your estate, and distribute the remaining trust assets to your loved ones.
Minor children and/or grandchildren. If you have minor children, you may distribute trust funds to them for their basic needs, e.g., health, education, maintenance and support, at any time regardless of their age. You may further provide at what ages you want your children to receive distributions of trust principal, e.g., ½ of their trust principal at age 25 and the balance and interest at age 30. Unlike probate, your children will not inherit at age 18.
Children and loved ones with special needs. If you have children or loved ones with special needs who are receiving state and/or federal subsidies, you may provide monies for them at your death by holding monies in a special trust for their benefit. States and federal government automatically terminate state funding for special need recipients if that individual has more than a specific sum of money titled in their name at any given time (typically no more than $2,000). A special needs trust enables your successor trustee to pay monies to that individual for expenses the state and/or federal subsidy do not provide for while enabling that individual to continue receiving state and/or federal aid.
Special children provisions. You may provide in death for your children and/or grandchildren what you would have provided them if you were living, e.g., special gifts such as high school and/or college graduation gifts, wedding gifts, a new car for college, a down payment on their first home, etc.
Pets. You may direct your successor trustee to distribute monies to a family member or friend to ensure your animals are taken care of when you die. The purpose of this distribution, is to pay for the animal’s basic expenses, including but not limited to food, grooming, veterinary care, dental care, etc., and most importantly, to ensure your animal is not euthanized unless medically necessary. If your family and friends are unable to care for your animals, you may direct your trustee to place your animals for adoption with a “no-kill” animal shelter.
Do I lose control of my assets by titling them in my trust?
If you fund a revocable trust with your assets, you retain control over those assets while you are alive and have capacity. This means while you are alive and have capacity, you are in charge of your trust assets (you may sell them, encumber them, give them away, acquire more assets, etc.). Your trust assets are still your personal assets. The only thing that has changed is legal title of your assets. (A revocable trust is a trust that can be changed or revoked at any time and for any reason so long as you have capacity.) Alternatively, if you title your assets into an irrevocable trust, you surrender ownership, control and management of those assets. Typically irrevocable trusts are funded for larger estates that will incur a federal estate tax.