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The legal profession and the public at large have finally come to realize that there is no longer a need to ever have a
PROBATE action. The reason is simple. Most estate planners understand that Living Trusts avoid probate. The public has learned of the benefits of a Living Trust from many sources, namely, talk radio, seminars, television, books, family members, other professionals, planners, banks, trust departments, friends, and neighbors. The mystique of trusts is history. The concept of another person holding property with instructions how to handle it is now widely accepted.
There are two basic kinds of trusts: a trust that is revocable, or changeable, and a trust that irrevocable, one that can not be changed. The more common type of trust is the revocable trust. The maker of the trust, usually called the GRANTOR or DONOR, determines the terms and conditions of the trust. The TRUSTEE is obligated to fulfill all of the terms and conditions of the trust document. The challenge is no longer understanding why to have a trust, it is more a question of how to fund it, manage it, change it, or terminate it.
The first question of the GRANTOR, who is usually the TRUSTEE, is “what assets should go into the trust?” The starting point is that all the titled assets should go into the trust. The selection of assets is extremely important for a parent who has created the trust after he or she has remarried to protect a current spouse and the children of prior a marriage. Having a third party act as the successor TRUSTEE to hold assets for the benefit of the GRANTOR’s spouse or children gives him or her peace of mind.
What happens upon the death of the GRANTOR? The successor TRUSTEE takes charge of the trust assets and fulfills the directions of the trust. This could mean that certain distributions are made, or another trust is funded, or trust assets are retained by the successor TRUSTEE to use for the benefit of a certain class of beneficiaries, such as the spouse or children. The successor TRUSTEE may be required to hold trust assets for the benefit of minors or young adults that the GRANTOR wants to have retained for disbursement at a later time.
The selection of assets to fund the trust, the discretion in disbursing assets, the choice of investments, the tax related issues (who pays the tax on the income), are all questions that may require the assistance of an experienced advisor. Thus, a professional should be brought into the decision making process not only at creation of the trust, but also upon the death of the GRANTOR. Bruno M. Rizzo is an experienced attorney in the areas of estate planning and elder law and can assist you in planning, administering and terminating trusts. |