Trusts

Trusts are similar to a corporation or other business entity. A corporation has a President who oversees and manages the corporate affairs. A Trust has a Trustee who oversees and manages the Trust's affairs. Just as a corporation can own assets, like bank accounts and real estate, a Trust can own assets, including but not limited to bank accounts and real estate. And just like when the President of a corporation passes away, the corporation names a new President, when a Trustee passes away, the Trust has named a successor Trustee.

There may be many reasons to have a Trust, but the most common reasons are to either avoid probate or reduce estate taxes. Any assets held in a Trust do not go through the probate process. Moreover, if there is an estate tax issue, certain trusts can be used to reduce or eliminate estate taxes.

There are several types of trusts:

Revocable Trusts: This type of trust is fully revocable and changeable during your lifetime. Usually such trusts offer almost no protection from creditors. The Trust Agreement will detail how the trust is managed during and after the granter's lifetime. (The grantor is the person who initially funds the trust.)

Irrevocable Trusts: Similar to the Revocable Trust, the Trust Agreement for an Irrevocable Trust details how the trust is managed during and after the granter's lifetime. But an Irrevocable Trust cannot be changed. The Trust Agreement is "set in stone" and only a court order can alter the terms. This trust can be designed to provide some protection from creditors.

Life Insurance Trusts: A life insurance trust is a trust that is set up for the purpose of owning a life insurance policy. If the insured is the owner of the policy, the proceeds of the policy will be subject to estate tax when he dies. But if he transfers ownership to a life insurance trust, the proceeds will be completely free of estate tax. Once you set up and fund the trust, you cannot get the policy back. If you become uninsurable, you will be committed to this trust as your only life insurance. The insured cannot serve as trustee of the life insurance trust. That means that he will have to find or hire a third party trustee.

Special Needs Trust: A Special Needs Trust is a specialized legal document designed to benefit an individual who has a disability. A Special Needs Trust enables a person under a physical or mental disability, or an individual with a chronic or acquired illness, to have, held in Trust for his or her benefit, an unlimited amount of assets. In a properly-drafted Special Needs Trust, those assets are not considered countable assets for purposes of qualification for certain governmental benefits. Such benefits may include Supplemental Security Income (SSI), Medicaid, vocational rehabilitation, subsidized housing, and other benefits based upon need. A Special Needs Trust provides for supplemental and extra care over and above that which the government provides.

Other Trusts: There is a trust for almost every situation. Consequently, there are two many to discuss each type of trust here. Please contact our office to discuss your particular situation and the type of trust that may be most beneficial for you.

Please contact us or submit your case for review
on our Case Review Page to discuss your trust.