Trust Administration FAQ
Answers from an Experienced Boca Raton Trust Administration Attorney
Some common questions include:
What is a trust?
A trust is an intangible legal entity that is an agreement between the settler and the trustee, naming the trustee to control the grantor’s property, or some of it, for the benefit of a beneficiary. The beneficiaries hold “equitable title” to those assets. The trust agreement defines the trustee’s powers and duties. Trusts of various types are frequently used in estate planning to achieve tax, financial, and personal objectives. The Trustee of the Trust is the person charged with keeping the assets safe, invested properly, and finally distributed to the Beneficiary at the proper time. The Settler can pretty much decide how the money must be kept (in interest bearing accounts, in real estate, or only in government insured FDIC accounts, etc.), and when it may be distributed (when the beneficiary is 18 years old; or one half when the beneficiary turns 18 and the other one half when the beneficiary turns 21, etc.). The Grantor of the Trust can also be the Trustee of the Trust, if the Grantor decides to set the Trust up in such a manner (e.g., Grantor sets him/herself up to be the Trustee of a Trust for his/her child).
Who should have a trust?
Any person who owns assets, including real property AND wants to avoid the expense of a probate administration, should consider creating a Trust. A trust can also be an excellent tax-planning tool. Many people with substantial assets or minor children can benefit from a trust. If a decedent’s estate is worth more than $2,000,000 in year 2007, it is subject to estate taxes. For a married couple, a properly drawn A/B Trust results in the first $4,000,000 of their assets being protected, instead of only $2,000,000. Thus, the estate taxes would not have to be paid and could instead go to the heir’s estate tax free. If you own real estate in several states, placing some of the real estate in a Trust prior to death may avoid unnecessary probate expenses in other states. Trusts can be included in your will or prepared separately. Many people with young children also use a trust to ensure that their minor children will be cared for if they die. Should something happen to you and you do not have a trust for your minor children then state laws require that a guardianship for the benefit of the minors be established. A guardianship requires most or all actions to have court approval and corresponding attorney’s fees and costs can be expensive. Another disadvantage of a guardianship is that a court will generally not allow investment of funds into anything but a FDIC protected type of investment (i.e., an insured bank account offering 2 – 3% return). Mutual funds or other investment options are generally off limits. However, with a trust, you can invest in higher yield securities so your child could receive substantially more. Also, a trust allows such funds to be held by a Trustee and disbursed as needed by the minor for education or other needs, giving the Trustee much more control over how the funds are disbursed to the child. Because trusts can be quite complicated, it is in your best interest to contact an attorney who regularly practices in the fields of wills, trusts administration and estate planning to assure your plan goes as smoothly as possible. The Walser Law Firm can assist you with creating a trust and estate plan that is tailored for your needs, will provide you with peace of mind, and avoid a probate administration.
What is the difference between a will and a trust?
A will and a trust are used for different purposes. They are similar in that they both allow you to designate exactly how you want your assets and other personal property to be distributed to your beneficiaries after you die. The major difference between a will and a trust is that a will does not avoid a probate proceeding and a trust does avoid probate. A trust is administered outside of the probate court after you die. What are the advantages of having a trust? The advantages of having a trust are: (1) the grantor may have control over the property, including after the grantor’s death; (2) the grantor may restrict access to the property; (3) the trust provides professional management/investment; (4) the trust provides for responsibility and accountability; (5) the trust may remove the property from estate taxation; (6) the trust may qualify for tax benefits; (7) the trust gives the grantor some flexibility, discretion, and control; (8) the trust may provide for asset protection (9) and the trust gives the family the financial privacy that is not available in a will, which when probated becomes public record. Please contact a Boca Raton trust administration attorney at Walser Law Firm when you are ready to create a trust that is customized for you and the needs of your loved ones.
If I set up a Living Trust, do I still need a will?
Yes. Your will serves as a back-up for assets that you either don’t or are not able to transfer to your Living Trust. Any asset not transferred to the trust will not pass under the terms of the trust document. However, in your will, you can include a clause that names either your trust or someone to inherit assets that you haven’t left to anyone else. If you don’t have a will, any asset that isn’t transferred by your Living Trust will go to your relatives in an order determined by the Florida law of intestate succession. Thus, the law may not distribute your assets in the way you would have chosen. Creating a Will in addition to your Trust can assure you that your assets that are not covered under your Trust are distributed according to your wishes.
What information do I need to provide a lawyer to create a will or trust?
First, you will need to provide your family details, such as your current marital status, the names and ages of your children and the other beneficiaries of your estate, if any. These are the persons or organizations who will inherit your estate. If you plan to leave property to your children, you will need to decide at what ages the children will actually receive the property they inherit. You also must decide the shares of your estate that each beneficiary will receive. If you have minor children, then you must choose a guardian. This is the person who will take care of your children in case you and your spouse die before your children become adults. The guardian will raise your children, the trustee, or if no trustee, the guardian will manage their money. Lastly, you must appoint a trustee or co-trustees who will make discretionary distributions of income and principal to your loved ones.
What types of trusts can I set up?
- A-B Trusts
- Revocable Living Trust
- Irrevocable Trust
- Charitable Trust
- Gift Trust
- Insurance Trust
- Qualified Personal Interest Trust (QPRT)
- Qualified Domestic Trust (QDOT) (Trust for non-citizen spouse)
- Special Needs Trust/Supplemental Needs Trust
- Spendthrift Trust (Trust for beneficiaries)
With the help of The Walser Law Firm, you can create the trust or trusts that will benefit and protect you and your loved ones.
What is the difference between a Revocable Trust and an Irrevocable Trust?
A revocable trust is where the Grantor can change the terms of the trust or even revoke the trust altogether and take back all of the assets in the trust. An irrevocable trust is where the terms of the trust cannot be changed (i.e., the beneficiary cannot be changed), and the assets placed in that Trust cannot be withdrawn by the Grantor.
What is an Accumulation Trust?
A trust in which the income is retained and not paid out to beneficiaries until certain conditions are met. For example, if you create a trust for your child’s benefit that stipulates that he/she will not have access to the assets until he/she turns 21 or graduates from college.
What is a Certification of Trust?
A condensed version of a Living Trust document which leaves out details of what is in the Trust and the identity of the beneficiaries. A Certificate of Trust is normally used to prove to a financial organization or other institution that you have established a valid Living Trust, without revealing specifics that you want to keep private.
How do I know that my trustee will do as I direct in the trust?
The person you appoint as your trustee must be someone you trust implicitly and when the person becomes a trustee, this individual has a fiduciary relationship with you and the beneficiaries of the trust. In other words, the trustee is held to the highest standard of conduct.
Will a will or trust govern the disposition of all of my property?
A trust governs the disposition of all of your property that you have conveyed into the trust. Thus, we always have our inter vivos trust clients execute a “pour-over” will to sweep into the trust any property that is not in the trust or that does not pass by contract. A will governs the disposition of all of your property that you own that does not pass pursuant to the terms of a trust or that does not pass by contract. Property that frequently passes by contract, typically pursuant to a beneficiary designation, includes life insurance, employee benefits and some bank and brokerage accounts. You should be sure that your beneficiary designations correctly express how you want that property to pass. If your will or trust contains sophisticated provisions, we can provide you with beneficiary designations that will coordinate the passing of all of your property under one, integrated plan.
Do I have to use an attorney for my trust? How much does it cost?
Only an attorney who regularly practices in the fields of wills, trusts and estate planning is able to provide you with sound legal advice as you put your trust and estate plan into place. Often the expense incurred in retaining an attorney to prepare and help you put an estate plan into place is worth hundreds of times what you and your family would pay with no planning or poor planning. It would also avoid the financial and emotional nightmares that can occur with a poorly drafted (or improper) plan. Please contact our office when you or a family member are interested in creating a trust and other estate planning documents that are tailored for your needs and will avoid a guardianship and probate administration. We serve clients in Boca Raton and surrounding South Florida areas.