Frequently asked questions
Answers to the most frequently asked questions about trusts
Few people understand the terminology and technicalities of trusts until they discover they need one…and by then it may be too late. Use this list of frequently asked questions (and their answers) to help you better understand the reasons for trusts and the process involved in establishing them.
A trust is a legal contract between two parties, the person who creates the trust (the “Grantor” or “Trustmaker”) and the person responsible for administering the trust (the “Trustee”). The Trustee manages the assets placed in the trust for the benefit of a third party (the “Beneficiary”). Most Trustmakers of a revocable trust serve in all three roles initially: that is, Trustmaker, Trustee and Beneficiary.
Who wouldn’t hope to provide everyone we love with the means to enrich their lives? Trusts are a great way to achieve this lofty goal. Some families have even more specific goals they want to achieve: planning for long-term care, educating their grandchildren, or providing for a favorite charity. Sometimes life events mandate trust planning. If you have a disabled child or a family member who is not great with managing money, these people need special consideration and a trust is a great way to make sure their specific needs are met. One thing is certain, if a trust is needed, the time to plan for it is now.
It is something everyone should think about! Trusts aren’t just about death and taxes. Setting up a trust is an excellent way to stay in control what happens to your estate, regardless of its size, to possibly reduce income taxes and protect against the publicity, expense and aggravation of probate. A well-written trust can also provide your beneficiaries with asset protection from creditors, predators and divorce. It is also very flexible and, since it’s a living document, it can be modified easily if there are changes to your life or in the law. Once a trust is properly funded, there will be no need for the very public probate process.
A big advantage of a trust is that it is generally the best strategy to avoid probate and protect financial privacy. Wills must be validated by the probate court, a lengthy and expensive process that can take six months to two years and, in some cases, even longer. Probating a will may involve attorney’s fees, executor’s commissions, administrative and other court costs. Unlike wills, trusts are not subject to probate and therefore enable you to keep your affairs private and minimize settlement costs and estate taxes.
There are many reasons to set up trusts. Married couples often realign the ownership of their assets to save substantial federal income taxes and pass more on to their heirs. Rather than owning assets jointly, they choose to own assets individually so that they can each take full advantage of providing for one another while still providing a legacy to children. This can be especially important in a blended family situation where there are children from prior marriages that each parent may want to provide once both parents have died.
If the time comes that you are no longer able to handle your own affairs, trusts can ensure that there will be someone who is experienced and objective to “mind the store.” If there is a serious illness or disability, a trust ensures that a plan is in place to take care of your needs and those of your loved ones. Think of a trust in this situation as your agent’s rule book; something an agent under a Power of Attorney simply doesn’t have.
If you think of a trust as a brand new automobile, the funding of the trust is the gas that powers the engine. Zaremba Center for Estate Planning & Elder Law is the only full-service law firm on the peninsula that assists you with a) transferring your assets into the name of your trust or b) making your revocable living trust the beneficiary of your accounts at your death. A properly funded trust will leave no assets exposed to the probate process and virtually guarantees that your assets will go to who you want, when you want and how you want them to receive those assets.
Your trust portfolio will include: Revocable Living Trust; Pour-over will; Personal Property Memorandum; Durable Power of Attorney; Living Will; Health Care Power of Attorney; Property Agreement; Certification of Trust; Asset Transfer Documents; and Maintenance Instructions.
At the Zaremba Center for Estate Planning & Elder Law, the relationship between the client and the office is paramount. We don’t stop being an advocate for you when the documents are signed. We offer complimentary trust reviews every three to five years, trustee tutorials for successor trustees and are always available to answer any questions without asking for additional fees
Usually attorneys draft trusts.
Ultimately, it is the purpose of the trust that determines how the assets are invested, and it is the responsibility of the trustee to see that the purpose is carried out. Often, the person who creates the trust will name a professional investment manager to work with the trustee and make investment recommendations based on the goals of the trust, the needs of the beneficiaries and the time horizon.
Nothing! We offer a complimentary initial consultation to answer all your questions and create your customized estate plan.
We offer a complimentary consultation for every estate planning client. Plan on dropping off copies of your existing documents at our office a few days ahead of your appointment so that we can review them prior to your arrival.
Common Trust Terms
A trust is a legal agreement between two parties - the person who creates the trust and the trustee, who may be a person, an institution or an independent trust company
A trustee is the person, institution or independent trust company managing the trust. A co-trustee manages a trust in cooperation with a family member or someone else.
The grantor is the person creating the trust.
A beneficiary is the person, institution or organization that receives the proceeds from a trust.
A living will is a healthcare directive. It names a person to decide what efforts, if any, should be employed to help keep the client alive should he or she face a life-or-death situation, namely, whether he or she would want to be resuscitated or kept alive by artificial means.
Durable power of attorney for financial affairs
This document names a person responsible for making all legal and financial decisions immediately upon signing the document or should you become incapacitated.
Durable power of attorney for medical affairs
This healthcare directive assigns responsibility to someone to make decisions about medical care in the event that you cannot. In some states, the living will and the medical power of attorney may be combined into a single document.
This person or corporation is named in your will to settle your affairs after you've passed away.