Trusts and Trust Administration
A trust is a set of instructions created while you are living that outlines how you want your assets managed and distributed to yourself and your beneficiaries. When you create a trust, you transfer title of your assets to the trust and the trust becomes the owner of your property. When you die, the trust instructs the trustee how to distribute your assets, thereby avoiding lengthy and costly probate proceedings.
A trust also allows your assets to be managed in the event of your incapacity without the requirement of a guardianship. Selecting the type of trust will depend on your situation and how you would like your assets distributed upon your death. Common types of trusts include:
- Revocable trust – a revocable trusts allows you to retain control of the assets in the trust during your lifetime. You can revoke or change the terms of the trust at any time.
- Irrevocable trust – in an irrevocable trust, the assets are no longer yours and you may only make changes with the approval of the beneficiary. However, assets in an irrevocable trust are not subject to estate taxes.
- Generation-skipping trust – this specialty trust allows you to pass assets directly to your grandchildren.
Why do I need a trust?
Trusts are useful to avoid probate, which can be time consuming, costly and emotionally difficult for your heirs. Also, a trust can avoid expensive guardianship proceedings and, in some cases, protect your assets from creditors.
Each trust identifies a successor trustee who must administer the trust after the owner of the trust is deceased. Duties of the successor trustee include communicating with the beneficiaries of the trust who must be kept informed, accumulating, tracking and investing in the assets of the trust, paying all debts, filing and paying taxes, distributing income in keeping with the terms of the trust and keeping good records of all these activities. Sometimes these duties are time consuming and complex and may require professional advice and expertise to best execute them. Trustees most often turn to a qualified CPA or legal adviser to administer the trust. Our office can help with trust administration whether or not we drafted your original trust. For a consultation, please call our office or contact us for more information.