These blog articles have one goal, education through communication. The conversational tone of these articles is meant to further that goal. With that in mind, lets dig into…
The Trust is one of the five pillars of estate planning. In Super Easy Ways to Understand Basic Estate Planning Terms, we commented that a trust allows for some pretty cool and specific distributions which can be used to help impart your values and beliefs unto your beneficiaries. This is so true, but the problem with a trust is that it is one of the five pillars that is most heard of or reference, but least understood aspects of estate planning.
For our conversation, the term trust will refer to a revocable living trust, a revocable trust, life trust, family trust, grantor trust, or AB trust. This is because they all are essentially describing the same item. That is where a living person creates an “entity” that has separate legal existence from the person that created it, and this “entity” holds property for the benefit of beneficiaries.
The Grantors generally maintain full control over the trust property while they are alive, with the ability to revoke, amend, or modify the provisions of the trust. One of the provisions in the trust is to appoint a trustee or trustees of the trust to manage and operate trust. In most trusts, the husband and wife are the primary, or first, trustees in charge of managing and operating the trust property. The Grantor can be the primary trustee because a trust exists the moment it is signed, and that existence is separate from the Grantor.
In addition to the immediate existence and existence separate from the Grantors, trusts come with many benefits and very few downfalls.
Personal and real property can be transferred into and out of trust with relative ease. Transfer requires retitling the asset.
The need for going through the probate process is eliminated (see The Absolute Beginner's Guide to Answering: Will Or Trust for more on probate). Probate is not required because the trust is the owner of the assets. Since the trust has a separate existence from the Grantors, the trust “stays alive” even if a Trustee or Grantor passes away, and the trust property continues to be governed according to terms of trust. On a side note, this is a great way to ensure all of your assets don’t end up in the hands of your minor children when they reach 21. By eliminating probate, you eliminate the expenses tied to probate, the delay of receiving property through the probate process (especially helpful for the surviving spouse), and you increase the level of privacy by avoiding the public nature of probate.
For a surviving spouse or other beneficiary, they can have immediate and continuous access to cash flow from the estate. This is because a will, or having no estate plan at all, requires a court order stating which person or people are entitled to receive the estate’s assets. Death, or naming a new trustee, doesn’t change how trust or its assets are handled, because the property is continuously governed by the terms of the trust.
A trust reduces the chance of someone contesting your estate plan after your passing. A trust takes away the need for the document which is usually challenged, the last will and testament. This a a great aspect, because if someone challenges your plan, whether it be a will or a trust based plan, the trustee must defend your plan in court. The trustee uses the assets of the trust to pay for the defense. The result is often a smaller estate to pass on to your loved one.
After mentioning a number of great benefits of a trust, I have to bring up a major downfall associated with a trust. This downfall is not a side effect of the trust itself, but more of the implementation of the trust. A trust with no property transferred into it is almost useless. Because the trust has a separate existence from the Grantor, any of the Grantor’s property not actually transferred into the trust, is not owned or controlled by the trust. If you work with Jeppesen Law, PLLC, we ensure that your trust begins and stays properly funded throughout its existence. We do this by either funding the trust ourselves or assisting you in funding the trust.
Call the office to set up an appointment to create your own trust or to have us review your current trust to ensure it is compliant with Idaho Law. (208) 477-1785.