In our experience, a carefully selected professional trustee is the better option for most wealthy families. In many cases, the ideal combination is to name a professional and a family member or trusted friend who can work side-by-side as co-trustees.
Generally speaking, once a trust becomes irrevocable, the trustee is entirely in control of the trust assets and the donor has no further rights to the assets and may not be a beneficiary or serve as a trustee.
All trusts have a grantor, sometimes called a settler or trustor. This is the person who creates the trust and is the one who has the legal capacity to transfer property held under the trust.
There are 7 states that are generally considered the best in which to establish your trust: Alaska, Delaware, Nevada, New Hampshire, South Dakota, Tennessee and Wyoming.
This is because there is no set minimum for the amount of money needed to establish a valid and enforceable trust. However, the general rule of thumb is that owning assets that collectively total $100,000 or more constitutes a trust rather than a will.
Establishing and maintaining a trust can be complex and expensive. Trusts require legal expertise to draft, and ongoing management by a trustee may involve administrative fees. Additionally, some trusts require regular tax filings, adding to the overall cost.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
The trustee manages the trust and distributes its assets at a prescribed time. The trustee is in charge of managing the assets in an irrevocable trust while the grantor is still alive.
Typically, a revocable trust with clear provisions for outright distribution might conclude within 12 to 18 months. However, in simpler cases, the process can take an average of 4 to 5 months without complications.
Trust checking accounts let trustees conduct transactions efficiently without needing outside funds while making it easy to track the financial activities related to the trust.
It is not unusual for the successor trustee of a trust to also be a beneficiary of the same trust. This is because settlors often name trusted family members or friends to both manage their trust and inherit from it. Naming the same person as trustee and beneficiary can be problematic.
An irrevocable trust offers your assets the most protection from creditors and lawsuits. Assets in an irrevocable trust aren't considered personal property. This means they're not included when the IRS values your estate to determine if taxes are owed.
The trustee generally has the authority to withdraw money from a trust to cover the cost of third-party professionals, as well as any other expenses arising as a result of administration.
Experience and Knowledge. Another key consideration is whether the individual or entity is qualified to act as trustee. If the trust has substantial assets, an individual with experience managing significant assets or with a background in finance or investments may be better suited to the role of trustee.
It can be advantageous to put most or all of your bank accounts into your trust, especially if you want to streamline estate administration, maintain privacy, and ensure assets are distributed according to your wishes.
Many advisors and attorneys recommend a $100K minimum net worth for a living trust. However, there are other factors to consider depending on your personal situation. What is your age, marital status, and earning potential?
A living trust, unlike a will, can keep your assets out of probate proceedings. A trustor names a trustee to manage the assets of the trust indefinitely. Wills name an executor to manage the assets of the probate estate only until probate closes.
There are a variety of assets that you cannot or should not place in a living trust. These include: Retirement accounts. Accounts such as a 401(k), IRA, 403(b) and certain qualified annuities should not be transferred into your living trust.
There is no minimum for a trust fund, but since there are both monetary and time costs to setting one up, the benefits should outweigh those costs before you start.
A Trust is preferred over a Will because it is quick. Example: When your parents were to pass away, If they have a trust, all the Trustee needs to do is review the terms of the Trust. It will give you instructions on how they distribute the assets that are in the Trust. Then they can make the distribution.
Parents and other family members who want to pass on assets during their lifetimes may be tempted to gift the assets. Although setting up an irrevocable trust lacks the simplicity of giving a gift, it may be a better way to preserve assets for the future.
Once your home is in the trust, it's no longer considered part of your personal assets, thereby protecting it from being used to pay for nursing home care. However, this must be done in compliance with Medicaid's look-back period, typically 5 years before applying for Medicaid benefits.
Rich people frequently place their homes and other financial assets in trusts to reduce taxes and give their wealth to their beneficiaries. They may also do this to protect their property from divorce proceedings and frivolous lawsuits.