Trusts, at a base level, are not complex instruments. A Trust is a contractual arrangement that allows one party to give property to a second party to hold the property of a third party.  The terms of the “trust agreement” define and describe the rights and duties of the parties involved in the transaction. As is true of most contracts, a trust is flexible and can be adapted to many varying situations.  One of these primary situations is during estate planning. There are numerous types of trusts that fall into a few general categories and types of trust (for example testamentary, living, revocable, and irrevocable trusts).  The best use of a given type of trust is dependent upon the facts and circumstances involved. When the correct type of trust or set of trusts are used properly, they can help protect an individual’s assets, account for the allocation of property upon the creator’s death, and aid in tax planning.

Trusts can be employed in a number of ways to plan one’s estate, protect assets and even create wealth. A number of techniques are available to limit and restrict assets and their disposition during life and at death which can be of great benefit to asset holders.  

Yes.  There are numerous types of trusts.  Many fall into a few general categories and types of trust (for example testamentary, living, revocable, and irrevocable trusts), but there also many other highly specific, unique, complex, and technical trusts that have their own sets of uses and purposes.  The best use of a given type of trust is dependent upon the set of facts and circumstances involved.  When the correct type of trust or set of trusts are used properly, they can help protect an individual’s assets, account for the allocation of property upon the creator’s death, and aid in tax planning.

With respect to a Trust, the Grantor is the person who creates the Trust using his or her own assets.  There are generally three separate parties involved in a trust agreement.  First, the “grantor” is the party that transfers his or her property to the trust.  Second, the “trustee” is the person or entity responsible for holding the trust property. Third, the “beneficiary” is the person on whose behalf the trust property is being held. Nothing prevents a single individual or entity from acting in all three capacities. When such an occurrence takes place, the trust is said to be a “grantor trust”. Generally, each of the three parties to a trust transaction will have different rights and duties with regard to the trust. These rights and duties are spelled out in the trust agreement and further by state law.

A Revocable Living Trust (“RLT”), also called a Living Revocable Trust or a Living Trust, is a legal instrument created to hold ownership of an individual's assets. In this form of trust, the Grantor retains the right to use the assets as he or she normally would during his or her life.  The Grantor also reserves the right to change or revoke the trust at any time during life.  In an RLT, the Grantor can reclaim assets he or she placed into it, divert the trust's income to the Grantor or another beneficiary, sell the assets or place more assets into it.  The Grantor maintains final control.  An RLT is a common estate-planning tool used to avoid the time and expense of probate, preserve privacy, and prepare an estate for ease of transition during life and upon death.

A trust can be created at any time, but proper planning is required.   There are many types of trusts and each has its own requirements, considerations, and applications.  As to when a trust can come into effect, it can come into effect during life or at death, and these terms are specified in the trust documents.

A “trustee” is the person or entity responsible for holding the trust property. This can generally be the creator of the trust.  When a person with the trust is no longer able or willing to act as trustee, the assets in a trust remain the property of a trust and remain for the benefit of the beneficiary (or beneficiaries) of the trust, a pre-determined successor trustee takes over the administration of the trust on behalf of the now incapacitated beneficiary without court intervention or supervision.

There are a number of key differences between a Last Will and Testament and a Revocable Living Trust.  Additionally, there are multiple types of wills and even more types of trusts.  For an additional discussion of this topic, see articles: Wills 101 and Trusts 101, included in the free educational materials.

When an individual dies without a valid estate plan, the applicable state’s default rules (called “intestacy” statutes) apply.  There are reasons why individuals rely upon their own estate plan rather than simply allow for the application of the state’s default intestacy laws.  (For a more detailed discussion, See Wills 101: The 5 “W”s - Who, What, Where When, and Why).

There are any number of reasons why someone would want a trust.  In the event that a person without a trust is adjudged to be incompetent, that person’s loved ones must go to the probate court to have a guardian of the estate of the incapacitated person’s assets established. This is a costly procedure and requires strict court intervention, budgeting and accounting on a regular basis.   Probate is not generally considered a preferred process and many people wish to avoid the time, expense, and complexities of stress associated with the probate process.  Additionally, upon death, the contents of a will are generally available for the public to ascertain, which is avoided through the use of a trust.

A trust, by itself, does not automatically avoid the burden of estate taxation. 

The trust tool offered by EPM is NOT INTENDED for the purpose of tax planning and/or estate tax avoidance, and is not suitable for that purpose.  The tax considerations are highly complex and should never be attempted without the advice and guidance of a licensed attorney.

A Living Trust and Living Will are both used in estate planning. However, a trust is intended to secure assets and control property, whereas a Living Will is a document used to spell out your medical wishes for your family and health care representatives if you suddenly become incapacitated.  A Living Trust specifies the control of property both during and after the creator’s life, while a Living Will addresses life-sustaining medical treatment while you are still alive, such as if you become severely disabled or are placed on life support.

Funding a trust is the process of transferring assets to the trust.  This includes setting up or transferring any bank account for the trust, depositing funds into the trust’s bank account, and transferring title to your assets from yourself to the trust.  Living trusts can be transferred while the grantor is alive, or after the grantor is dead.  Certain assets are typically not placed into the trust (such as the grantor’s personal vehicle as it may be difficult or more expensive to obtain insurance for a vehicle owned by a trust), and certain assets such as an IR, may lose tax benefits if they are transferred under a trust.  It is generally best to fund the trust at the time the trust is created.  Any assets excluded from the trust are typically transferred to the trust through the use of a pour-over will.  However, the larger the value of the assets outside of the trust, the greater the value of the assets that will need to go through probate.  Once assets are transferred under a trust, the trustee will need to sign as the trustee of the trust, rather than signing personally.

EPM’s services do not include the perpetration, filing, or recording of a quit claim deed or other transfer deed for real property (e.g. a house).  EPM has established relationships with multiple law firms that provide these services for a flat rate (plus the additional cost charged by the local city/county for any necessary transfer stamps and recording fees).  EPM does not receive any referral fee or other compensation from these law firms. The fees vary by locality and municipality, but are generally $100 to $150 for the legal service fee charged by the law firm plus $40 to $60 per filing/recording fee(s) from the city/county/municipality.