Trustee
Trustee
A trust is a legal method for placing funds, personal property, and other assets in the control of a trustee for the benefit of an individual. The trust can designate one or more persons, an organization, or a bank to act as trustee. A trust can be used for paying bills, managing investments and real estate, and general protection of a person’s estate. Trusts are used to; manage large assets, avoid the expenses of probate, avoid conservatorships, and provide for ongoing financial management if the grantor becomes incapacitated.
Revocable Living Trust
*A Trust is a legal structure that contains instructions on exactly
how and when to pass assets to your beneficiaries.
*A Revocable Trust, also called a revocable living trust, is a document that can be modified by
the person who creates it at any time while he/she is still alive.
*A Trust Agreement is a legal document that sets up a Trust. It may be referred to as a
Declaration of Trust, ie “The Hill Family Trust”. The documents set forth the names of the
grantor, the trustee, & the beneficiaries. It states how the trustee should distribute the
income from the trust assets while the grantor is alive, and how the assets or income
should be distributed to the beneficiaries after the grantor’s death
Important Terms
Living Trust- A Trust is set up while the grantor is alive
Revocable Trust- A living Trust that the grantor may change or cancel at any time.
Irrevocable Trust- A living Trust that the grantor may not change and/or cancel.
Grantor- The person who sets up the Trust.
Trustee- Person or financial institution in charge of the Trust.
Trust Administrator- Person assigned to manage the Trust
Beneficiary- Person to inherit the estate from the Trust documents
Why you Should have a Trust
1. Most Important: It is easier for your loved ones when you die!
2. Preserve & pass on wealth quietly “Creating Generational Wealth”: When you transfer your assets to your beneficiaries through a will, your estate is settled through a procedure known as probate, which is conducted in state courts. Probate proceedings can incur delays, probate fees can be costly, and the will becomes public records. A Trustee account does not go through the courts upon your death.
3. Control over distributions of your assets: You can put conditions on how and when your assets are distributed. If you become incapacitated, a living trust provides for a successor trustee to take over the control of the trust. It can state how the trustee should distribute the income from the Trust assets and how the assets or income should be distributed to the beneficiaries after your death.
4. Setting up in advance the appropriate situation for your beneficiary: Outline detailed directions as to how and when funds are used & dispersed. ie, you can instruct the trust to specifically pay for your grandchildren’s college education/ vocational training.
5. Can avoid Estate Taxes: A Living Trust when properly drafted can be used to reduce or eliminate estate taxes under certain circumstances. In most cases, a Trust is revocable: A will only become effective upon your death, a Living Trust goes into effect during your lifetime and in most cases is revocable, meaning you can change, amend and/or terminate at your own wishes.
6. Avoids PROBATE!
When & Why To Create a Trust
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When to consider setting up a Trust.
At least 5 years before you think you will need to apply for Medicaid
Ideally when you have the finances and resources to do so!
2. Outline your goals when setting up a Trust.
What do you want to accomplish by setting up the Trust?
3. Determine the structure of the Trust.
How do you want to pass on certain assets & to whom. At this time you will list restrictions
and special rules you want to specify for beneficiaries.
4. Started thinking & deciding.
Who will be the - sole grantor, the beneficiaries, successor trustee, and who will manage
properties & assets for minor children?
8 Steps to Setting up a Trust Account
Step 1
Organize Documents:
Obtain titles & deeds, stock certificates & life insurance policies information
Step 2
Create The Trust Document:
The grantor creates a trust agreement, which is a legal document that designates the grantor, the trustee,
and the beneficiaries, and outlines how the trust assets are to be managed and distributed. Part of this
step is deciding whom you want to name as beneficiaries, how you want the trust income and assets
distributed to them, and whom you want to name as trustee (or trustees).
Step 3
Sign & Notarize the Agreement:
Signed Trust document in the presence of a Notary and a witness (witness cannot be a beneficiary,
eliminate conflict of interest).
Step 4
Obtain Taxpayer Identification Number (TIN):
(May not be applicable)
For many irrevocable Trusts, it will have its own taxpayer identification number (TIN). However,
revocable trusts do not need a separate TIN because they use the social security number of the
grantor, which is the person that created the trust.
Step 5
Set up a Trust Bank Account:
Identify the bank that will be used to hold Trust Account Funds, obtain a list of all required
documents needed to set up the account.
Step 6
Transfer Assets into the Trust:
- Real Estate: Transfer real estate, the grantor executes a deed that transfers the title to the
property to the Trust
- Personal property w/ a title document: Cars, RVs, Mobile Homes
Step 7
Additional Transfer of Assets:
Other Personal Property: Property without title documents can be transferred by writing a description
of the property and making a note that it is being transferred to the Trust
Step 8
Name the Trust as Beneficiary:
Life Insurance Policies and retirement accounts (401K & IRA) should have the Trust as a Beneficiary
especially if minor children are listed as Beneficiaries. These assets are payable on death, so a beneficiary
can automatically receive them outside of probate. The grantor can have these assets transferred into the
Trust upon their death by naming the Trust as the beneficiary.